Senate Majority Leader Harry Reid called the bill to help IPOs "not perfect." The Senate passed it and sent it back to the House on Thursday.
WASHINGTON (CNNMoney) -- The Senate on Thursday passed a bill making it easier for more companies to become publicly traded by bypassing audits and disclosures now required for investors.
The Senate voted 73-to-26 to pass the House version of the bill with one small change intended to help protect investors. Because of the change, the bill returns to the House.
"The bill is far from perfect, but it's a good bill," said Senate Majority Leader Harry Reid. "It'll help capital formation."
House Majority Leader Eric Cantor indicated support for the Senate change and promised quick passage of the bill, meaning it could arrive on President Obama's desk next week.
Earlier this month, the House overwhelmingly passed the measure that rolls back some rules the Securities and Exchange Commission enforces on small and medium companies attempting to make an initial public offering.
The measure sparked concerned letters from investor groups, unions, consumer groups and even the head of the SEC. All of them said the bill could open the door for more failed IPOs and investor fraud.
In a letter last week, SEC Chairman Mary Schapiro asked lawmakers for changes, saying "too often, investors are the target of fraudulent schemes disguised as investment opportunities."
The bill would relax SEC rules for small and medium-sized companies with less than $1 billion in gross revenue seeking to go public. The measure gives them up to five years, or until revenue tops $1 billion, to supply an independent audit and certain investor disclosures.
Critics said $1 billion is too high a threshold -- some 80% of firms going public would be able to bypass disclosures.
It would also make it easier for companies with as many as 2,000 shareholders to avoid registering with regulators.
The bill would also exempt firms from nonbinding shareholder votes on executive pay and benefits packages, which just came as part of the Wall Street reform law. In the aftermath of the financial crisis, the law made it tougher for CEOs to reap bonuses tied to soaring stock prices -- particularly when the company is over-leveraged and making risky bets.
Critics, including the Council of Institutional Investors, said that easing the rules applied to far too many companies and could make investors wary of investing in them.
"A company (with $1 billion in revenues) has the resources to comply with disclosures," said Jeff Mahoney, general counsel to the Council of Institutional Investors.
The bill would also allow companies to solicit investors -- including the use of advertisements -- when going public, which is currently prohibited. And it would allow them to raise money from larger numbers of small, less sophisticated investors.
Barbara Roper of the Consumer Federation of America warned the provision would make it easier for companies to take advantage of seniors, luring them to sink their retirement savings into an IPO.
"A retiree who has that nest egg isn't necessarily a sophisticated investor and shouldn't be speculating on private offerings," Roper said.
The bill would also allow what's called "crowd funding," allowing firms to bypass regulations to raise money from large pools of small investors by directly soliciting them over the Internet. Critics are concerned about the potential for fraud.
The only change that the Senate added was to require that those working as an intermediary to such crowd funding register with regulators.
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