Legislation making it easier for small businesses to raise money survived a test vote in the Senate on Wednesday, increasing the chances it could emerge as one of the few bipartisan bills to pass Congress during this election year.
The procedural vote was to cut off debate and move the measure toward passage. Only a day earlier, the legislation that had passed the House two weeks ago by an overwhelming margin appeared in danger of dying.
Senate Democrats met late Tuesday to discuss how to proceed after Republicans succeeded in blocking Democratic amendments that would have increased protections for those investing in small businesses and startups, and extended the life of the Export-Import Bank.
The 76-22 vote to move forward sets up a vote on final passage planned for Thursday after the Senate votes on two amendments addressing aspects of investor protection. Approval of those proposals would send the bill back to the House.
President Barack Obama has expressed his support for the legislation, which would ease some federal rules so small companies and innovators could more easily attract investors and go public. But the White House has said it supported Senate Democratic efforts for adequate safeguards for potential investors in light of any reduced government oversight over investment transactions.
Senate Republicans said the legislation was a bipartisan effort to eliminate federal red tape and create jobs, and they stuck together on the test vote.
"We need to show the American people that we can do this," said Senate Republican leader Mitch McConnell, R-Ky. "This bill is exactly the kind of thing Americans have been asking for, greater freedom and greater flexibility."
Democrats were split; some said they could not back the legislation because of inadequate investment protections.
"This bill would allow companies to advertise virtually unregulated stock offerings on television or on billboards," said Sen. Carl Levin, D-Mich. He said the House bill would let large companies with many shareholders avoid regulation by the Securities and Exchange Commission.
The head of the SEC, Mary Schapiro, has written Congress listing concerns about how the bill could open up investments to possible fraud and abuse. The chairman of the House Financial Services Committee, Rep. Spencer Bachus, R-Ala., has said the bill contains strong investor protections and that Senate Democratic objections were part of a "cynical campaign strategy of running against a so-called do-nothing Congress."
The centerpiece of the bill is a measure to reduce the costs of companies seeking to go public by phasing in over five years SEC regulations that apply to what are categorized as "emerging growth companies." That status would be in effect for companies with annual gross revenue of less than $1 billion.
The measure would remove SEC regulations preventing small businesses from using advertisements to solicit investors, raise from 500 to 2,000 the number of shareholders a company or community bank can have before it must register with the SEC, and allow smaller companies to sell up to $50 million in shares, compared with $5 million now, without filing some SEC paperwork.
It also encourages the practice of "crowdfunding," where the Internet is used to raise capital from a large number of smaller investors. The measure limits individual contributions to $10,000 or 10 percent of the investor's annual income.
Senate Democrats who sought to amend the crowdfunding provision said that without changes the practice could lead to fly-by-night schemes to attract vulnerable investors to risky or deceptive ventures.
The rejection of the amendment to extend and expand the life of the Ex-Im Bank also angered Democrats, who said that without the bank U.S. companies would lose a crucial means of financing overseas sales. The bank's authority expires on May 31, and before that it will hit its lending limit of $100 billion. The Democratic proposal would have extended that authority for four years and raised the lending limit to $140 billion.
McConnell said Republicans were willing to take up the bank's fate in separate legislation. While supported by most major business groups, the bank is opposed by conservative groups such as the Club for Growth.