WASHINGTON (CNNMoney) -- It was supposed to be a slam dunk.
But late Tuesday, it became unclear whether the Senate would agree to take up a House bill allowing more companies go public by bypassing audits and disclosures now required for investors.
Earlier this month, the House overwhelmingly passed a bill to roll back some rules that the Securities and Exchange Commission enforces on small and medium companies attempting to make an initial public offering.
The Senate had been expected to agree to limit debate and pass the House bill this week. If no changes are made, it was expected to go straight to President Obama who has indicated support for the measure.
However, the measure sparked concerned letters from investor groups, unions, consumer groups and even the head of U.S. Securities and Exchange Commission. All of them say the bill could open the door for more failed IPOs and investor fraud.
On Tuesday, the Senate Democrats failed to muster enough votes to approve two key Democratic-backed changes to the House bill.
Some of those changes would have added investor protections back to the bill. One change would have extended funding for the Export-Import Bank, an agency that helps finance foreign purchases of U.S. exports.
Senate Majority Leader Harry Reid met with Democrats Tuesday afternoon to talk about support for moving forward on the House bill. A vote to limit debate and move forward is scheduled for Wednesday morning.
The House 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.
Some critics said the $1 billion is too high a threshold -- some 80% of firms going public would be able to bypass disclosures.
The House 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 a 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 House 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.
Republicans opposed proposed changes that would weaken the House bill.
Those pushing for more investor protections in the bill pointed to concerns penned by SEC Chairman Mary Schapiro. Schapiro warned in a letter last week that "too often, investors are the target of fraudulent schemes disguised as investment opportunities."
-- CNN's Ted Barrett contributed to this story. 
