A lot has been going on that I haven't had a chance to report on here, but this post catches up. To me, it now seems like a crowdfunding exemption has suddenly become "cool" in DC, and Democrats and Republicans are engaged in a game of "I was a punk before you were a punk."
More wonderful news! As part of the American Jobs Act introduced by President Obama earlier today, the White House announced that it will work with the SEC on a crowdfunding exemption. Here's how the White House Office of Science and Technology explain it on their website (and link to IndieGoGo and Kickstarter projects as examples):
As part of the President’s Startup America initiative, the Administration will work to unlock this capital through smart regulatory changes that are consistent with investor protection. This means reducing the disproportionately high costs that smaller companies face when going public, as well as raising the cap on “mini” public offerings (Regulation A) from $5 million to $50 million. It also means responsibly allowing startups to raise money through “crowdfunding” – gathering many small-dollar investments that add up to as much as $1 million. Right now, entrepreneurs like these bakers and these gadget-makers are already using crowdfunding platforms to raise hundreds of thousands of dollars in pure donations – imagine the possibilities if these small-dollar donors became investors with a stake in the venture.
Here's another new paper supporting a small offering exemption. This one even says so in the title!Crowdfunding Microstartups: It's Time for the Securities and Exchange Commission to Approve a Small Offering Exemption
"Each proposal has attributes common to others; and each proponent makes important arguments. We believe there is value in reading and considering each of these proposals in the regulatory process."
-- Heminway and Hoffman, p. 62.
Very exciting news! The SELC recently sent a petition to the Securities Division of the Washington State Department of Financial Institutions advocating a state level securities exemption, along the lines of SEC exemption proposal File 4-605, but with a $1000 (not $100) cap on individual investment. Since federal law leaves securities regulation up to the states in cases where an offeror and all investors live within the same state, an exemption like this would be fantastic for local investing and entrepreneurship.
The Sustainable Economies Law Center has decided to begin its efforts with the state of Washington for several reasons. First, Washington is known as having one of the most small-business friendly securities divisions in the country. Second, there are many community-based organizations throughout Washington state that have expressed interest in supporting a rule change that would make it easier for communities to invest locally.
This is an opportunity. If you have any affiliation with any organization that seeks to do good things in Washington State, or even if you just reside in the state, you can help enormously by taking a few minutes to write a good, old-fashioned letter in support of this petition to Scott Jarvis or Bill Beatty at the address at the top. This is not a well-known issue targeting one of the usual political offices; for something like this, every letter will make a difference.
I was just clued into a couple of small-offering / crowdfunding exemption proposals published in academic Law Reviews (one of them forthcoming). Both cite the SELC and Startup Exemption petitions as antecedents, and make alternative proposals along some of the same axes (size of cap on offering, size of cap on individual investment, offeror and investor qualifications, disclosure and transparency terms, etc.) while adding lots more legal discussion and academic rigor .Crowdfunding and the Federal Securities Laws (Draft, 8/24/2011)
Proceed at Your Peril: Crowdfunding and the Securities Act of 1933
Joan MacLeod Heminway and Shelden Ryan Hoffman
Tennessee Law Review, Vol. 78, No. 4, 2011
University of Tennessee College of Law
On Huffington Post, IndieGoGo co-founder Slava Rubin cited the Campaign to Change Crowdfunding Law as one of "IndieGoGo's Most Extraordinary Campaigns." They're all great to know about-- see especially "The First Crowdfunded Baby" (#3).
Check out "Realising the full Potential of Crowdfunding Initiatives: The Bielsco-Biala Declaration." Subtitled like the manifesto that it is, this 4-page document will be presented this November at AGORADA, a conference on "Smart Regional Specialization" organized by Eurada, the European Association of Development Agencies.