THE BLOG
06/01/2010 05:12 am ET | Updated May 25, 2011

The Financial Stability Act: What Would Johnny Think?

I don't know if Johnny Appleseed would have read the 1336 pages of the proposed Financial Stability Act of 2010, but if he did, he would have found multiple sections quite objectionable. You see, Johnny was an angel investor in the 1700's, and he would understand what the modern day angel investors need to be productive, including regulations that don't thwart their ability to invest.

Johnny was investing in apples of course, and that's how John Chapman got to be known as Johnny Appleseed. Today's angels invest in the most promising companies of innovation, create jobs and drive our economy. So they are really important to the US Economy.

Here are a few changes to the proposed Financial Stability Act that Johnny would demand.

Sections 412 and 413 call for adjusting the accredited investor standard for inflation. Currently, these standards are at $200,000. for a single person or $300,000 per couple. They also require a net worth of $1,000,000. According to the Angel Capital Association, adjusting these figures for inflation every five years could eliminate as many as 67 percent of all accredited investors. This would have a devastating effect on start-up companies and greatly impair job growth.

Further, Section 426 establishes authority of state regulators over regulation D offerings. The problem here is that this requirement would make it more difficult to raise angel capital from investors in different states, make it unclear as to which states have jurisdiction and possibly lengthy waiting periods for business to receive capital, resulting in impairment or even death of these business.

Where would we be without our lovely apple trees if Johnny hadn't been able to spread his seeds and help hundreds of local entrepreneurs start their own apple orchards? We need modern day Johnny Appleseeds and to make our economy grow. Let's fix these provisions in the Financial Stability Act and plant the seedling companies that will become growth engines to our economy.