Yesterday I saw a tweet from Josh Kopelman and then this morning a post from Bijan about Senator Dodd’s financial reform bill suggesting that it would impose a 120 day review period on angel investing (which would be crazy).  They are based on an article on the Huffington Post by Robert Litan from the Kauffman Foundation, titled “Proposed ‘Protections’ for Angel Investors are Unnecessary and Will Hurt America’s Job Creators."  The article claims:

All of this would change if Section 926 of the Dodd bill is included in any final reform legislation. That section would require, for the first time, companies seeking angel investment to make a filing with the Securities and Exchange Commission, which would have 120 days to review it. This would both raise the cost of seeking angels and delay the ability of companies to benefit from their funding.

Unfortunately, the article comes without a link to the actual bill, which you can find on the Banking Committee’s web site: HTML Cover page, PDF of the Financial Reform Bill.  Sadly it’s not possible to link directly to Section 926, but you can search for "926” in the PDF and find it quickly.  The section is titled “AUTHORITY OF STATE REGULATORS OVER REGULATION D OFFERINGS.”

I am not a lawyer and I am assuming that the folks at the Kauffman foundation know more about this than I do, but after reading the section it doesn’t seem to suggest anything nearly as dramatic as the quote above!  In particular, the section explicitly provides for:

[…] the Commission may designate, by rule, a class of securities that it deems not to be covered securities because the offering of such securities is not of sufficient size or scope.’’

In other words this sounds specifically like they can establish that angel financings will be *not* be covered by this!

I would much appreciate if a securities lawyer took the time to read the entire section (which modifies a section of the Securities Act of 1933) and let everyone know whether any concern here is warranted.