Murphy revives HALOS Act

By:  Scott Whipple
The Bristol Press

U.S. Sen. Chris Murphy, a Democrat, reintroduced the HALOS Act, also known as Helping Angels Lead Our Startups on Thursday. Murphy was joined by U.S. Senators John Thune, R-S.D.; Pat Toomey, R-Pa.; Brian Schatz, D-Hawaii, and Angus King, I-Maine.

Senators say their legislation would remove burdensome restrictions from individuals who want to invest in startup companies. It would also allow those startups to get the investments they need to grow their business and create jobs.

Entrepreneurs commonly attend “demo days,” or conferences that allow them to showcase their business model in front of valuable startup investors, such as “angel investors” and venture capitalists.

Angel investors provide an estimated 90 percent of outside equity to help grow young businesses. In 2010, companies in their first year created an average of three million jobs. However, new Securities and Exchange Commission regulations, initiated by the JOBS (Jump Our Business Startups) Act, have put angel investors participating in demo days at risk of being forced to turn over extensive personal financial details.

Critics of the JOBS Act complain that the act has failed to help startups raise capital and create jobs.
Murphy calls these new regulations “an onerous third-party vetting process, [an] invasion of privacy that deters many investors from backing startups at a time when new businesses need support the most.”

According to Murphy, the HALOS Act would lift this regulation and would instead preserve the same investor vetting process that angel investors have been using at demo days. By removing these restrictions and eliminating the potential for an investor’s privacy to be invaded, the HALOS Act will enable startups to continue to receive investments they need to grow and create new jobs.

“Startups are critical to the future of America’s economy,” Murphy said. “They enhance our communities, employ our friends and neighbors, and innovate to make our nation more competitive in today’s global market.”

The senator added that Congress can help these businesses by making it easier for angel investors to put capital behind them.

“That’s exactly what our bipartisan HALOS Act will do,” he said.

Prof. Drew Harris, Central Connecticut State University School of Business, agrees with Murphy.

“Access to Angel Investor capital is essential to start-up communities, early stage ventures and job creation,” Harris said. “Congress has long defined Angel Investors by their income level and liquid wealth [levels have varied over the years], but AIs were self-certified; there was not verification of their wealth and income. The JOBS Act, perhaps anticipating the release of rules governing equity crowdsourcing, sought to create a mwechanism to verify self-certification.”

However, the reporting requirements to validate AI status, Harris said, leaves many angel investors uncomfortable.

“We should seek to make it easier for knowledgeable investors of any financial status to invest in early stage ventures,” he said, “and to use their expertise and capital to enhance the likelihood of success of those ventures.”