Farr sides with Angels, sees tougher investor standards as 'paternalistic' and hurting ventures
By Milt Capps
State Revenue Commissioner Reagan Farr says Congress should not raise investor accreditation criteria as it goes about sweeping financial regulatory reform.The Restoring American Financial Stability Act of 2009 that is now making its way through Congress would raise investor accreditation criteria from $1 million in net worth and $200,000 in annual income, to $2.3 million net and $450,000 in income.
The bill put forward by U.S. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) would also require entrepreneurs seeking to raise Angel capital to file their round with the SEC, rather than simply rely on applying basic criteria to would-be investors.
As reported earlier by VNC, the Nashville Capital Network, the Angel Capital Association and the National Venture Capital Association have weighed-in against some of the provisions of Dodd's bill, which passed out his committee this week, after brief debate.
In an interview this week with VNC, Farr said he concurs with venture-community comments such as those reported by VNC Monday, and believes the changes proposed "could be harmful to the investment climate..."
Farr said he believes that "to exclude a whole swath of people under this paternalistic approach" is bad policy, particularly in a state such as Tennessee, which he noted is already "challenged by a lack of readily available investment capital."
Given that, he said, "taking capital off the table by arbitrarily raising limits is very counterproductive to what we're trying to accomplish," in Tennessee.
Farr acknowledged the need for some investor criteria, because simply being "deemed a 'savvy investor' doesn't mean you're good at reading financials." Therefore, he added, "I think the current levels are good."
Farr noted that Tennessee's scarcity of capital provided the impetus for passage a year ago of the Tennessee Small Business Investment Company Credit Act," or TNInvestco program, as it is known.
He added that the Bredesen Administration's "focus, right now, is on the expansion of the TNInvestco program" and on "making sure that as we hand that program off to a new Administration, there's controls and reporting mechanisms in place that we can be proud of."
One or more votes on both Congressional financial-reform legislation and TNInvestco expansion and technical clean-up are expected next week. ♦