Home > Uncategorized > Killing the baby in the womb.

Killing the baby in the womb.

One of the primary drivers of growth in our economy is the flexibility of our entrepreneurs and investors being able to invest in companies they believe are viable or to start them entirely. Sen. Chris Dodd, however, is intent on changing all of that. Look at the new regulations that he has in store:

First, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.

For starters, why should start-ups have to file with SEC as if they have been already established mega-corporations? The point about allowing start-up to start-up is because they have a tough time attracting capital because whatever it is they are establishing is nascent (not to say that the business is nascent itself). This is also another thing that is being added to the already crowded plate of SEC, the same regulatory body that could not sniff out Bernie Madoff (or refused to sniff, because it was told about him).

Secondly, raising the requirements for how much an “accredited investor” is worth is silly. Another beauty about our system is that anyone can invest should they feel that the reward exceeds the necessary risk associated with the venture. Where does Congress get off saying that it will establish can or cannot invest in a start-up? If you need more proof that the government (especially a Democratic government) is concerned with the concentration of power, this is it. I guess it is meant to “protect” the investor from himself, but should that be the concern of Congress?

I don’t know if it will be much of a benefit to make investors report to the federal government, but if this bill passes it will be another blow against state sovereignty. As with the Patient Protection and Affordable Care Act of 2010* the Dodd proposal will simply make states wards of the federal government as opposed to sovereign entities. This is a blatant centralization of power at the federal level and the states should stand against it.

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