A Few More Boosts for Crowdfunding?

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As my post from earlier this year outlines, the idea of crowdfunding – that is, the use of online sites to garner investments from individuals – had attracted the attention, largely positive, of the Securities and Exchange Commission.

Now it appears that the White House and Congress are interested, as well. A White House Fact Sheet on The American Jobs Act, introduced earlier this month, states that “as part of the President's Startup America initiative, the Administration will work with the SEC to conduct a comprehensive review of securities regulations from the perspective of these small companies to reduce the regulatory burdens on small business capital formation in ways that are consistent with investor protection, including expanding “crowdfunding” opportunities and increasing mini-offerings.”

A blog post by Aneesh Chopra and Tom Kalil of the Administrations' Office of Science and Technology Policy, expands on this, noting notes that one goal of the Act is “responsibly allowing startups to raise money through “crowdfunding” – gathering many small-dollar investments that add up to as much as $1 million.”

About a week after the Act was introduced, Representative Patrick McHenry (R-NC) introduced H.R. 2930, the Entrepreneur Access to Capital Act. The bill would amend securities laws to provide registration exemptions for certain crowdfunded securities. The exemptions would cover securities issues that raise no more than $5 million, and in which individual investments are limited to the lesser of $10,000 and 10 percent of the investor's annual income.

The idea of allowing smaller companies to raise modest amounts of money from investors without jumping through the hoops required of companies that are going public is an idea whose time has definitely come. For starters, the economy needs all the boosts it can get from entrepreneurs. Crowdfunding may enable them to get their ventures off the ground.

Moreover, while the potential for shady operators to make off with unwitting investors' money still exists, the access to information available today allows them to research potential investments in a way that wasn't possible when securities laws were written in the 1930s, notes Amy Cortese, writing in the New York Times. Cortese is the author of “Locavesting: The Revolution in Local Investing and How to Profit From It.”

Crowdfunding already is legal in the U.K. and France, notes Sherwood Neiss, founder of Startup Exemption and an entrepreneur, in the Washington Times.

Here's to hoping that it's time is soon coming in the U.S., as well.

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Karen Kroll supplies the Business Finance community with reporting and commentary examining cash management and treasury-related topics.

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