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    April 16, 2010

    Position Paper: Impact on Startup Firms and Angel Investors
    U.S. Senate Financial Reform Bill “Restoring American Financial Stability”
    Senate Committee on Banking, Housing, and Urban Affairs
    Senator Christopher Dodd, Chairman (D-CT)

    Introduction: In March 2010, Senator Chris Dodd of Connecticut, introduced a bill on the Senate floor that is ostensibly designed to overhaul the regulation of financial services companies and provide more consumer and investor protection.  The Bill passed the Committee on Banking, Housing, and Urban Affairs on March 22nd and is headed to the full Senate for approval.  It is the opinion of Technology Credit Union that certain provisions in this bill will not only hamper the economic recovery but will also place significantly detrimental limitations on job growth and company formation in the Silicon Valley.

    Bill Provisions: Incorporated into the Senate Banking Committee’s bill are the following highlights: (a) Creates a watchdog to protect consumers from abusive terms and deceptive practices in certain financial services; (b) Ends the “too big to fail” practices; (c) Creates additional levels of government to identify problem companies, streamline bank supervision, and increase powers to pursue financial fraud; and (d) Changes investor requirements and regulation.  It is primarily in this last provision that our organization foresees problematic impacts for our members as the legislation affects job creation and early stage company growth.

    Bill’s Impact:  The bill will impact financial services companies and consumers in many ways, however, Technology Credit Union’s primary concern at this time are sections buried in the 1,336-page proposed legislation that will impact jobs and economic growth in California, which already has unemployment of 12.5%.  These stipulations in the bill will dramatically increase the financial threshold for accredited investors (those for whom the Regulation D regulatory oversight exemption is waived) from $1,000,000 in assets or $250,000 in income to $2,300,000 in assets or $450,000 in income.  This will significantly cut down on potential angel investors who fund early stage technology companies after the “friends and families” and before the venture capitalists. The bill also gives the Securities and Exchange Commission (SEC) a four-month period to review and approve much of the seed funding, and the bill gives states undefined control over this funding.  With angel investors pouring over $25 billion per year into new ventures during recent years, the resulting job growth (estimated at a half million) and company formation could be severely reduced.

    Conclusion: The Senate Committee on Banking’s proposed financial reform bill is potentially an extremely costly example of regulatory over-reach, and its impact on job creation and economic opportunity could be the death knell of innovation and economic recovery in both California and the United States.

    Please make your voice heard and contact Senators Feinstein and Boxer and tell them this bill will hurt California!

    Barbara Boxer
    General Contact:(202) 224-3553
    SF Office #: (415) 403-0100
    Web Form: 

    Diane Feinstein
    General Contact: (202) 224-3841
    SF Office #: (415) 393-0707 



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