By Ben Weyl, CQ Staff

The Senate on Thursday is expected to pass legislation to loosen securities regulations in a bipartisan bid to help small businesses, but not before making modifications that will send the bill back to the House.

The measure is intended to provide smaller companies with easier access to capital, which supporters say would create jobs. Critics will have an opportunity to change the bill in an effort to enhance investor protections, and at least one amendment is likely to be adopted, which would delay enactment of a bill the House passed overwhelmingly two weeks ago.

The Senate voted to cut off debate on the legislation (HR 3606) on Wednesday with a 76-22 vote, signaling broad bipartisan support for the measure and its likely passage. Amendments from Oregon Democrat Jeff Merkley and Rhode Island Democrat Jack Reed had been expected to receive votes that day, followed by passage. However, Senate leaders postponed the votes until Thursday, amid fierce industry opposition to Reed’s amendment.

Merkley’s amendment — which would add restrictions to the bill’s language on “crowdfunding” — is expected to be adopted, and the House might either clear the measure for the president or request a formal House-Senate conference committee. An aide to House Majority Leader Eric Cantor, R-Va., declined to predict what the House might do before the Senate’s votes.

The underlying bill would overhaul securities law in several ways. It would raise the threshold for the number of shareholders that triggers Securities and Exchange Commission registration to 2,000 from 500, as a way to relax the regulatory burden and costs of public share sales.

Reed’s amendment would require the SEC to include “beneficial owners” when tallying the shareholders of record in a company. Reed said on the Senate floor on Wednesday that his amendment is “targeted at the provision that would allow currently reporting companies that are routinely disclosing information to investors to essentially go dark, to stop reporting, to revert to a private status.”

However, the amendment also would require many more companies to register with the SEC that currently do not. A spokesman for Reed said the amendment would affect brokers and banks that hold shares in companies on behalf of their clients, with voting rights that come with the shares treated as "pass throughs" for clients.

Financial Industry Opposed

The financial industry and other business groups strongly oppose the amendment, seeing it as something of a poison pill that would effectively cancel out the bill’s intent.

“Changes of the magnitude of the Reed amendment require a close examination to ensure there are no unintended negative consequences on job creation and economic growth,” R. Bruce Josten, vice president of government affairs for the U.S. Chamber of Commerce, wrote in a letter to senators Wednesday. He said the chamber might include a vote on the amendment on its annual scorecard.

Since cloture on the underlying bill has already been invoked, germane amendments need only a majority for adoption. Still, the Reed amendment appears likely to be rejected if it comes to a vote, with Republicans united in opposition and at least a few business-friendly Democrats likely to vote against it. Even more Democrats would oppose the amendment if they feared that its adoption would sink the underlying bill.

Sen. Chris Coons, D-Del., would vote against it, his aide said Wednesday. Coons cosponsored legislation (S 1824) to lift the shareholder cap to 2,000, and he was joined by Thomas R. Carper, D-Del., and Mark Warner, D-Va.

Democratic leaders might pull the amendment on Thursday if supporters know it is doomed and want to avoid a vote on a measure so opposed by business interests. It also would avoid putting some Democrats in the embarrassing position of voting against a provision that they have effectively voted for already, since all the Democrats voted on Tuesday to invoke cloture on a substitute amendment that included the shareholder language.