News
News Home
Quick Bites
Exploradio
News Archive
News Channel
Special Features
NPR
nowplaying
On AirNewsClassical
Loading...
  
School Closings
WKSU Support
Funding for WKSU is made possible in part through support from the following businesses and organizations.

Akron General

Levin Furniture


For more information on how your company or organization can support WKSU, download the WKSU Media Kit.

(WKSU Media Kit PDF icon )


Donate Your Vehicle to WKSU

Programs Schedule Make A Pledge Member BenefitsFAQ/HelpContact Us
Government and Politics


New SEC guidelines could hurt companies relying on angel investors
Start-ups and investor groups are concerned about new requirements for accredited investors
Story by BRIAN BULL


 
New FEC regulations could stop the flow of cash from angel investors to companies like Juventas Therapeutics.
Courtesy of Nick Ares
Download (WKSU Only)
In The Region:

Start-up companies and investor groups are troubled over a proposal by the Securities and Exchange Commission. The SEC may raise requirements for accredited investors, people allowed by U.S. Securities law to invest in private companies. They say if the revised rules are approved, the ranks of angel investors could suffer.

LISTEN: BULL ON INVESTORS

Other options:
Windows Media / MP3 Download (4:02)


Rahul Aras is CEO of Juventas Therapeutics, a Cleveland biotech firm. 

Juventas made the front page of the Plain Dealer recently for its developing heart failure treatment, called JVS-100. Aras says medical progress does not come cheap.

“It’s quite costly," Aras says. "We’ve moved the drug through what are called Phase 2 clinical trials. The next step for us is going to be a Phase 3 clinical trial and those can cost upwards of $50 to 60 million.”

Hurting the angels
Aras’s company is a spinoff from the Cleveland Clinic, and has done well in its seven years. 

But Aras is concerned over the recent activity in Washington. As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has to revisit the definition of “accredited investor”.

Currently, it is someone with an annual income of $200,000 or with $1 million in net worth, not counting their home. 

The proposed standards would raise the income requirement to $500,000, and raise the net worth to $2.5 million.

This would likely affect “angels,” accredited investors who put money into start-up businesses. 

“A lot of our early investment came from angel investors, and a lot of our money even in the later runs, came from angel investors," Aras says. "So rewriting those definitions in any way, and limiting the pool of angel investors, is just going to make it harder for capital to be sourced at these early stages of development.”

Cathy Belk is also watching. She is chief operating officer at Jumpstart, an organization that helps entrepreneurs across the region get their companies funded and supported. 

She cites a Cleveland State study that illustrates the impact new, startup companies supported by JumpStart and its partners packed for the region last year. 

“Two-hundred-and-forty-five startups located here in Northeast Ohio generated $424 million in economic benefits for the state of Ohio," Belk says. "And it’s the money that they’re raising that enables them to hire people, to create salaries and jobs, and that is the very heart of the concern around any kind of legislation or rules, that might limit the amount of capital that these companies would potentially have access to.”

Keeping investors out of bad decisions
Meanwhile, backers of the SEC proposal, including the North American Securities Administrators Association, say they also want the SEC to help ensure that accredited investors are well-versed in investing to avoid making bad decisions.

But Frank Samuel disagrees with that notion. 

He is President of VentureOhio, a non-profit group aiming to increase entrepreneurship across the state. 

“Is this a real problem?" Samuel says. "I mean, what’s the evidence that investors with the current levels of requirements are making bad investments or suffering losses at an inordinately high rate? I mean, investment can be a risky business under the best of circumstances.” 

In VentureOhio’s latest survey, 176 Ohio companies said they will need more than $520 million by the end of 2015, to keep growing and contributing to their local economies. 

So the possibility that there might be a tightening of investor capital does not sit well with Samuel and others.

Educated investors
The other argument for the SEC’s push for educated investors, is that it can reduce people falling for fraudulent offerings. 

Clay Rankin of the North Coast Angel Fund, disagrees with that.

“Frankly, I don’t think regulations in and of themselves are going to solve the fraud problem," Rankin says. "And all you have to do is look at what happened with the Bernie Madoff scandal. You had a lot of very high, net-worth individuals backing Bernie Madoff. Fraud is gonna happen.”

Nationally, the Angel Capital Association has campaigned against the revision. 

The group claims that up to a fourth of its members may be struck from its rosters if the definition is approved. 

The SEC has indicated that it is open to other criteria. 

This could include someone’s investment experience and total liquid assets. 

But time is running out. Its review of the accredited investor definition has to be done by July 21st, the four-year anniversary of President Obama’s signing of the Dodd Frank bill. 

Add Your Comment
Name:

Location:

E-mail: (not published, only used to contact you about your comment)


Comments:




 
Page Options

Print this page

E-Mail this page / Send mp3

Share on Facebook



Stories with Recent Comments

Could University Circle developments ripple into East Cleveland?
Outsiders are so far off the beaten path and you all need to attend the meeting being held today 8/31/15 Cleveland Public Library, 1:00 PM. http://44112news.co...

ResponsibleOhio leader says the state is trying to set Issue 3 up for failure
Ohio suppose to believe that a group of investors were united under one cause to legalize marijuana.Once legal they all of sudden turn into 10 different compani...

Terry Pluto: U of A's new athletic director has the toughest job in town
It is a hard sell. The Students do not want to go to the football games and they do not want to pay for the program. They have a lot of student loan debt and t...

Akron considering the future of the B.F. Goodrich smokestacks
This BFGoodrich alumna says, "Thank you, Dave Lieberth!"

State creates panel to look at Ohio charter school sponsors
It is more than disturbing that charter schools, which seemed like a good idea years ago, have begun to cripple public school education.

DEVO mural in Akron is now on display downtown
The installation is not at the former site of Chili Dog Mac. CDM was one block north on the other side of Main St.

New report shows growth in white collar jobs for Northeast Ohio
Unfortunately, there are fewer jobs in comparison to the number of professionals applying for them. I have been had a full time job since June 2012. In order to...

Advocacy group: Ohio could lead in clean energy
Ohio Legislators, You are supposed to be our leaders but you're not taking us where we want to go - where we need to go!

Campaign for and against marijuana legalization begins
Cannabis legalization needs to happen as soon as possible! But not if it gives monopolies to a selected few to grow and sell the herb. Responsible Ohio's mono...

Heinen's in downtown Cleveland sponsors a contest for food entrepreneurs
Love that this took place right here! What a way to support local. Thank you Heinens! Love this quote, as a small local biz, I agree, it's big!! "To be a small...

Copyright © 2015 WKSU Public Radio, All Rights Reserved.

 
In Partnership With:

NPR PRI Kent State University

listen in windows media format listen in realplayer format Car Talk Hosts: Tom & Ray Magliozzi Fresh Air Host: Terry Gross A Service of Kent State University 89.7 WKSU | NPR.Classical.Other smart stuff. NPR Senior Correspondent: Noah Adams Living on Earth Host: Steve Curwood 89.7 WKSU | NPR.Classical.Other smart stuff. A Service of Kent State University