WASHINGTON • In a rare achievement in the gridlocked Congress, the Senate this afternoon passed legislation making significant changes in how new businesses can raise money from investors.
The bill advanced despite Sen. Dick Durbin's assertion that it would create jobs for "new charlatans."
The Senate voted 73-26 to pass the JOBS Act -- short for Jump-start Our Business Start-ups -- after adding a modest amendment to protect investors. The House already has passed the bill, meaning that the change must be reconciled before it is presented for the president's signature.
Nonetheless, it could pave the way for an unusual Capitol Hill success on the economic front at a time when agreement in the politically divided Congress seldom occurs.
The legislation creates a new category of "emerging growth" companies that would be able to raise up to $1 million from public stock offerings without the usual disclosure regulations governing publicly traded companies. It would would allow financing known as crowd-funding, in which equity investments could be solicited over the Internet with minimal oversight from the Securities and Exchange Commission.
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Afterward, Sen. Roy Blunt, R-Mo., heralded the ability of Congress to work together on legislation and said it would "help give job creators more certainty."
Sen. Claire McCaskill, D-Mo., also voted for the legislation, unlike about half of the Democrats in the Senate who objected to provisions that loosened oversight.
In a statement, McCaskill referred to "innovative, hardworking entrepreneurs" in Missouri. "This bill will cut red tape and open up more resources for them to succeed, to create more jobs, and to keep this economic recovery moving in the right direction," her statement read.
Durbin was among those arguing that the legislation fails to provide safeguards that investors need. Among its provisions, companies as large as those with $1 billion in annual revenues could ignore for five years certain rules put in place after recent financial scandals, including the regulation calling for an outside auditor to judge internal financial controls.
Durbin said relaxation of rules would give scam artists and financial predators an easier path to bilking unknowing investors.
"How many times have you picked up your cell phone to see there's a Nigerian opportunity out there?" Durbin asked. "Be prepared after this bill passes. They won't be from Nigeria, they may be from next door."
An amendment adopted before passage increases some of the disclosure requirement relaxed in the House legislation. For instance, before initial public stock offerings, companies would have to publicize financial statements or tax returns.
White House spokesman Jay Carney said in a statement that the president was grateful for the Senate action.
He added: "We are heartened by the important investor protections added to the crowd-funding provision and will be vigilant in monitoring this and other elements to ensure the overall bill achieves its goal of helping entrepreneurs while maintaining protections for investors.
