Several readers have written to say that I got it wrong about the Senate crowdfunding bill, that the final legislation is more like Merkley’s S.1970 than McHenry’s H.R.2930, which became part of the JOBS act. Thank you for the correction! Brad McGee of iCrowd pieced together the actual text of the crowdfunding portion of the JOBS Act– see below, and many thanks to Brad. I can’t digest it now but look forward to doing so soon.
“Lobbying 2.0: Crowdfunding Act Buoyed By the Enthusiasm of the Crowds” by Sarah Lai Stirland, TechPresident
2 days ago, the House took 6 of the Capital Formation bills that passed with almost unanimous bipartisan support (including our Crowdfunding bill), packaged them together into one (called the JOBS Act) and passed it again with overwhelming bipartisan support. The President came out and endorsed this Republican-led initiative and now they are calling the Senate’s bluff. Either sit and do nothing and come election-time Americans will know that the Senate is the cause of the gridlock in DC or bring the bill (or their own version of the bill) to the floor to vote and act on our country’s behalf.
Kristie Arslan, President & CEO, National Association for the Self-Employed
Roger Campos, President & CEO, Minority Business Roundtable
Allen Gutierrez, National Executive Director, The Latino Coalition
Barbara Kasoff, President & CEO, Women Impacting Public Policy (WIPP)
Karen Kerrigan, President & CEO, Small Business & Entrepreneurship Council
Todd McCracken, President, National Small Business Association
- Call Harry Reid and Tim Johnson’s offices to express your support for a meaningful crowdfunding exemption:
Harry Reid (D-NV), Senate Majority Leader: (202) 224-3542
Tim Johnson (D-SD), Senate Banking Committee Chair: (202) 224-5842
- Tell the Senate to Legalize Crowdfunded Securities with a Full-page Ad in Politico – this campaign is even more important now, after last week’s news, and there’s not much time left to reach the goal. If you’ve read this far, you can at least cough up a measly $5.
- Register yourself on Legalizecrowdfunding.org
- Retweet Bennet’s tweet – hey, it can’t hurt, but I’m reluctant to list this here since I think it’s only marginally helpful. Please don’t consider this by itself as “doing your part.”
Our Loudsauce campaign for an ad in Politico to nudge the Senate on CF is now live! Please donate, and spread the word: http://goo.gl/ZnHTl. The ad still has a few tweaks pending, and we may give it a more directly challenging lede (Dear Senate: The House and White House Agree… Why Don’t You?), but you can see a near-final version below. It was written by Michael Shuman, author of The Small-Mart Revolution and Going Local, and designed by Jake Levitas, who created posters and other graphics for Occupy Wall Street.We want to fund this soon. By all accounts, during this presidential election year, it will be near-impossible to get any new legislation passed if it doesn’t happen soon. This article from Portfolio.com (thanks, Kostas Stoilas!) makes the same point. I set the fundraising deadline to March 12, but sooner is better, and Politico needs about 1 week’s notice to place an ad. We’re figuring if we don’t get some significant movement in the Senate by April 1, then there’s no way– no joke. The ad will direct people to a new website LegalizeCrowdfunding.org, which Woodie Neiss and the Startup Exemption folks plan to launch tomorrow. The site will include a form for people to register themselves as entrepreneurs who would benefit from a CF exemption, and then fill in a couple more fields (including their location). This info will be combined into a mouse-over map of the USA, with pop-ups showing all of the supporters, and how many jobs they hope to create through crowdfunding. Nice!
In older news (catching up here) the White House called for a national crowdfunding framework in its Jan 31 package of pro-startup legislation, as covered here by William Carleton.Carleton has also been covering the Jan 25th crowdfunding proposal from NASAA (state regulators), citing Jim Hamilton’s discussion. The proposal requires intermediaries that would need to be registered broker-dealers (boo), but it has an aggregate individual investment cap and a 30-day escrow (good ideas). It also spells out regular reporting requirements. One major question not fully answered in my reading is that it proposes a new “Form CF” for issuers to file in their home state– but I don’t see any promise that this would be the only state filing required. Bad news if an issuer wants to offer to investors in multiple states and would need to file in every state that any investor resides in– or, if not, by what date would all 50 state securities offices be able to agree, coordinate, and build the infrastructure for this? Carleton also performed the public service of re-publishing the NASAA crowdfunding proposal draft, since it was removed from NASAA’a own site soon after it was published there.
Finally, this post from Carleton’s blog discusses whether a CF exemption should (per S.1791) or should not (per H.R.2930) require an intermediary, aka a platform. I think that non web-savvy businesses should be able to crowdfund small investments locally by putting a sign up and connecting personally rather than having to do it online, but I understand the argument both ways and see the benefits of registered intermediaries for control and monitoring. I’d say the ideal solution would be something like requiring an intermediary if investors reside over 100 miles away from the offeror’s main business location, but not if they’re all local.
This Investment News article from Jan 1 (registration required) reports that the three crowdfunding exemption bills (H.R.2930, S.1791, and S.1970) are stalled in the Senate. On Jan 24th, it’s still true.
To remedy this, a bunch of us will be launching a CF campaign soon to raise money to buy a full back-page advertisement in Politico, which is distributed in printed tabloid format in DC, and is reportedly read by congresscritters. According to Politico’s rate card (PDF), a black-and-white full-page ad on the back cover will cost $13,680K.
Here’s a draft (PDF below), still in need of a designer’s touch. Comments welcome, and please watch this space for when the campaign goes live. Of course I hope you will contribute! People in the Senate need to see that there is public interest and support for these proposals before venturing to consider them. That’s not just our assumption– DC sources have told us this.
Meanwhile, Joan MacLeod Heminway and Shelden Ryan Hoffman have published their final version of Proceed at Your Peril: Crowdfunding and the Securities Act of 1933 in the University of Tennessee Law Review. It’s comprehensive and current, and new tables in the back list and compare crowdfunding platforms worldwide– a wonderful contribution.
[…] it seems prudent to engage those involved in crowdfunding in the regulatory discussions in a meaningful way before Congress passes legislation that legalizes crowdfunded offerings of securities or the SEC publishes a rule proposal as part of the notice-and-comment process
Our approach encourages a balancing of issuer, investor, and regulatory interests in a manner similar to that involved in federal consumer protection regulation. The overall analogy to consumer protection is too complex to explore in any depth here. Suffice it to say, however, that there are both commonalities and differences in selling securities and other products at similar price points over the Internet.
On the latter point, I wonder if the newly-created Consumer Financial Protection Bureau
will have primary jurisdiction over CF, rather than the SEC.
I’m updating old blog entries to include linked screenshots to relevant external documents from around the same time. Here’s one:
30 Jan 2012
“Crowdfunding exemption – WeFunder and other Senate nudging” by Paul Spinrad, Boing Boing
I wrote this post, like the post above, to encourage people to fund the Politico ad. The ASBC and Loudsauce originated the idea for the ad, but I liked the idea and pitched in. My Boing Boing post argued that,
this legalization of crowdfunded securities would create meaningful jobs and enable grassroots innovation on an enormous scale. […] I see it as a regulatory change comparable in importance to the revision of NSF’s Acceptable Use Policy, which first allowed commercial traffic on the Internet. That early 1990’s policy democratized the flow of information the way a well-implemented crowdfunding exemption would democratize the allocation of human effort.
If you’re interested in innovation (or just like to have fun) check out the MAKE Ultimate Kit Guide, which is available online (see below) or at newsstands nationwide. I may be biased since I worked on it, but it is an amazing document, like nothing you’ve seen before, and all of us at MAKE are so proud of it.
“(10) makes available on the issuer’s website a method of communication that permits the issuer and investors to communicate with one another;”
“(II) provides public communication portals for investors and potential investors;”
I haven’t seen the text yet, but last week Sen. Jeff Merkley (D-OR) introduced S.1970, the ambitiously-acronymed CROWDFUND Act (Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure) of 2011. Here is Merkley’s press release; it sounds like it has a 1M cap on total offering, just like H.R.2930 and S.1719, and it was likewise referred to the Senate Banking Committee. Co-sponsors are Michael Bennet (D-CO) and Mary Landrieu (D-LA). Finally! This is great news.
“Race to relax crowdfunding rules invites strange bedfellows” by Deborah L. Cohen, Reuters
The Senate Banking Committee is holding a hearing Dec 1 (today for most) called “Spurring Job Growth Through Capital Formation While Protecting Investors.” CF exemption bill S.1719 author Sen. Scott Brown (R-MA) will be testifying, along with Senators Mark Pryor (D-AR) and Kay Bailey Hutchinson (R-TX), Meredith Cross, Prof. John C. Coffee, and others. The current crowdfunding exemption proposals will certainly be addressed, and I don’t know who will be in favor of the idea (besides Scott Brown) or against it. Will Sen. Mark Pryor convey criticism from Arkansas State Securities Commissioner Heath Abshure?