CROWDFUNDING LAW USA
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Full text of speech delivered by Freeman White to those assembled for the Senate Summit on Equity Crowdfunding on July 13th, 2012: Thank you all for taking the time to be here this morning. Thank you especially to Senator Brown and his staff as well as Senator Bennet and his staff for convening us all here today. We are honored to join you in discussing the important matters before us. We would like to start by acknowledging that all of us want to get this right. I take your attendance here as an affront to any cynic who says that crowdfunding can’t be well regulated or that it will take too long to figure it out.
i 4 Votes On Friday July 13 , 2012, CFIRA , the leading regulatory advocacy group for the crowdfunding industry, hosted its first public forum wherein the nation’s key lawmakers, regulators, crowdfunding enthusiasts, entrepreneurs and investors all came together to discuss the rules that will eventually govern Crowdfund investing under the JOBS Act.
What has to happen before Crowdfunding goes legal (or how I quit worrying and learned to love the administrative process)Last Friday, the Department of Justice and the Consumer Protection Working Group held their annual summit on consumer protection. The summit highlighted the latest scams and what consumers can do to protect themselves. The Internet and social media have made it easier for scammers to contact and fool unsuspecting individuals with lottery scams, romance scams, unlawful debt collection practices, and health scams. Common features of all of these scams are unsolicited contacts and advance fees paid to an organization the individual has never dealt with before. These common features—unsolicited contacts and advance fees—distinguish these frauds from securities... Ever since the Internet became a medium for communication, fraudsters and scammers have tried to use it to steal money from overly-trusting individuals.
The following framework is the foundation of HR2930, the Entrepreneur Access to Capital Act that passed the US House of Representatives 407-17 on November 3, 2011. It is also the foundation for S1791, the Democratization of Capital Act submitted in the Senate soon after. President Obama also made reference to this framework in the American Jobs Act. This framework is the suggested rule under which the law should be made. At the bottom are the shared components EACH CFI site must have in order to register to offer crowdfunded securities to the public.
March 23, 2012 FOR IMMEDIATE RELEASE 3 Entrepreneurs, 579 days, 1 Crowdfunding Law Now, What Does it All Mean? (Washington, DC) - The Jumpstart Our Business Startup Act (JOBS Act), H.R. 3606, passed the U.S. Senate on March 22, with overwhelming support (73-26). So what will the impact be, particularly as it relates to the CrowdFund Investing measure, for America’s entrepreneurs and small businesses?
The JOBS (Jumpstart Our Business Startups) Act that passed in the House today contains some big changes for crowdfunding startups. It now moves on to the Senate. Right now, it’s illegal for a startup to solicit investors on platforms like Twitter or Kickstarter. But the JOBS Act would change that. For startups raising $1 million or less, anyone can now buy up to $10,000 or 10 percent of the annual income (whichever is less) in equity. (Anyone who wants to get in on the ground floor of my bonsai pets business, send your checks to WeWork Midtown, care of VentureBeat.)
Tuesday, March 6, 2012 10:00 AM - 12:00 PM 538 Dirksen Senate Office Building [view archive webcast] will meet in OPEN SESSION to conduct a hearing entitled “Spurring Job Growth Through Capital Formation While Protecting Investors, Part II.” The witnesses will be: Mr. William D. Waddill, Senior Vice President and Chief Financial Officer, OncoMed Pharmaceuticals, Inc.; Professor Jay R.
On Monday Massachusetts Senator Scott Brown (R) urged a Boston audience to pressure his Senate colleagues to bring his crowdfunding bill – or any crowdfunding bill for that matter—to a vote soon. The Senate Banking Committee will hold a hearing on the issue on Tuesday. The general idea behind the proposed legislation is to make it legal for individual investors to put some money — up to $1,000 or $10,000 depending on the bill — into startups in return for equity.
In early November, the U.S. House of Representatives overwhelming passed the Entrepreneur Access to Capital Act , a crowdfunding bill which permits startups to offer and sell securities via crowdfunding sites like Kickstarter or social networking sites like Facebook. As I discuss below, this is a game-changer for startups and lifts certain securities law prohibitions that have been on the books since the 1930’s.
<img class="aligncenter size-large wp-image-27375" title="facebooklogo" src="http://www.wired.com/images_blogs/business/2011/01/facebooklogo-660x433.jpg" alt="" width="660" height="433" /> It’s an innovative financial tool that has great promise and great peril. Crowdfunding could aid investors and small businesses, at a time when they both desperately need help. Or crowdfunding could become an efficient, online means for defrauding the investing public. Its future is in the hands of Congress . Crowdfunding began over a decade ago, when struggling artists and musicians used this method to raise online donations from their fans.
President Barack Obama’s nominee for chairman of the Securities and Exchange Commission, Mary Jo White, said Tuesday she’ll move quickly to complete required rulemaking under the Dodd-Frank Act and Jumpstart Our Business Startups Act if confirmed for the job, as the agency has already missed several key deadlines for new rules. Ms. White also said she would make it a priority to move forward with potential reforms to money market funds and strengthen the SEC’s enforcement program. “The SEC needs to get these rules right, but it also needs to get them done,” Ms.
I was (and remain) skeptical of crowd funding’s place within the traditional film funding model, but have been pleasantly surprised to see it recently perform adequately for two film related raises — both of which were to pay for lawyers. It’s always reassuring to see film making axioms play-out: in this case it’s that the only people who make money from every film are the attorneys. The first one was to raise money for a securities attorney to petition the SEC to modify the accredited investors laws to allow crowd funding for films (something that I fear will be so fraught with fraud that producers will long for the respectable days of pre-crowdfunding film investment.)
8 DEC 2011 : The Senate introduced S.1970 (a bill to amend the securities laws to provide for registration exemptions for certain crowdfunded securities) and referred it to the Committee on Banking. The U.S. House overwhelmingly passed its first significant crowdfunding legislation, in the form of H.R. 2930 , the Entrepreneur Access to Capital Act. The bill (now in the Senate) amends the Securities Act of 1933 , by allowing entrepreneurs to crowdsource (online) up to $2 million per year in investment capital directly from individuals without having to register the investors with the SEC; however, the commencement and completion of the raise do need to be filed with the SEC. Entrepreneurs (the “issuers”) must provide potential investors with audited financial statements in order to qualify for the $2 million cap, otherwise you are capped at $1 million.
The U.S. Congress is now considering a framework for capital formation allowing investment funds to be raised via crowdfunding platforms in exchange for equity. The crowdfunding legislation would allow unaccredited investors to invest small amounts in start-ups and small to medium-size businesses. Should a bill be passed into law that legalizes crowdfunding, it has the potential to disrupt and possibly re-shape the current venture capital market. However, despite the Entrepreneur Access to Capital Act (H.R. 2930) breezing through the House of Representatives with strong bipartisan support, similar legislation now faces an uncertain path in the Senate.
Crowdfunding sites like IndieGoGo offer VIP Perks but not shares— because offering profit participation is illegal . Securities law lets you gamble your retirement on investments conveyed through the all-controlling financial system, but you can’t invest $50 in someone you actually know personally , in order to help them start a small business, write a book, make a film, build an iPhone app or develop a new product that you believe has commercial potential. The SEC can change this situation by introducing a regulatory exemption that caps individual investments at $100 . I believe that doing this would change everything for crowdfunding, spark innovation, and help vitalize the economy from the bottom up. The idea of an exemption based on very low cap on individual investment is not new ; according to the SEC’s Anthony Barone, it has been discussed and brought to the SEC’s attention by academic economists.