Members of Congress are looking to tweak rules issued by the Securities and Exchange Commission last year that allow the advertising and marketing of private securities offerings. Senate Bill 2498, Helping Angels Lead our Startups Act, also known as the HALOS Act, would ease requirements and restrictions on “demo days” and traveling road shows where issuers reach out to potential investors with in-person events.

Last July, the SEC amended the longstanding Regulation D. Intended to help expand startups' access to capital; it now permits startups to use general solicitation when raising capital for non-publicly traded corporations, so long as steps are taken to verify accredited investors. The SEC created several safe harbors for meeting that requirement and, with a flexible approach, established methods that may be used. “These safe harbors raise privacy and compliance concerns for angel investors, requiring entrepreneurs and startups to take on a job they may not have the physical or financial means to do,” a statement accompanying the legislation says.“It has put educational and economic development events like demo days...at risk of being subject to onerous third-party verification rules.”

Demo days, supporters argue, existed for years without problems during the ban on general solicitation and it doesn't make sense to change the process and add additional hurdles for angels and other accredited investors “in an effort to fix something that isn't broken,” it adds. The HALOS Act would protect these outreach events from being classified as general solicitation. Specifically, the bill would clarify the definition so it does not apply to a presentation, communication, or event:

Sponsored by federal, state, or local government; a college or university; non-profit; established angel group; venture forum, venture capital association or trade association; or any other group approved by the SEC;

Whose advertising does not make any specific investment offerings;

Whose sponsor does not make investment recommendations, provide investment advice to attendees, engage in investment negotiations, or charge any entrance fees other than what covers the cost of the administrative cost of the event;

Where no specific information regarding investments is communicated by the issuer other than that they are offering securities, the type and amount of securities being offered, the amount of securities still available, and the intended use of the securities.

The bill would not only force changes to the SEC rule, which was crafted to meet JOBS Act requirements, but also alter its longstanding practice of issuing no-action letters when concerns are raised as to whether investor outreach was targeted enough to escape classification as general solicitation.

The  legislation is sponsored senators Chris Murphy (D-Conn.), John Thune (R-S.D.), Pat Toomey (R-Pa.) and Brian Schatz (D-Hawaii), Rep. Brad Schneider (D-Ill.) and Rep. Steve Chabot (R-Ohio)

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