Showing 5 posts from April 2013.
If you missed it, you can catch my interview on Business Radio X here. Candace Klein from SoMoLend and Maurice Lopes from EarlyShares.com joined me in a discussion regarding crowdfunding.
If you weren't able to join us at the Ritz Group on April 18, 2013 you can see the entire event on this webcast archive.
I had a great time evaluating three different crowdfund offerings with my friends Candace Klein of SoMoLend and Maurice Lopes of EarlyShares.
Before the Shark Attack event began, we had a live Web TV interview that covered crowdfunding, the JOBS Act and the potential for crowdfunding in Georgia under the Invest Georgia Exemption. The Invest Georgia Exemption allows Georgia-based companies to raise capital via sales of securities to investors (including non-accredited investors) that reside in Georgia without relying on Regulation D.
If you're interested in hearing more about the practical implications of crowdfunding, please join me at the Ritz Group's "Shark Attack" crowdfunding symposium this Thursday, April 18, 2013 at the City Club in Buckhead (Atlanta) where I'll be joined by Maurice Lopes (Crowdfund Professional Association) and Candace Klein (SoMoLend and Bad Girl Ventures) in an interactive webcast event on the topic hosted by Dara Albright (NowStreet).
Congress is taking notice, as the House Small Business Subcommittee on Investigations, Oversight and Regulations last week held hearings on the SEC's delay.
In testimony before the Subcommittee, SEC staffers explained the work that had been done so far to implement the JOBS Act but were curiously silent as to the reason why the SEC had missed the deadline for the adoption of rules to implement the crowdfunding provisions of the law.
In his opening statement, Chairman David Schweikert (R - Az.) noted that these regulations were "long past due." He said that "the longer we wait for action by the regulators, the more our engines of economic growth will continue to simply tread water, or worse yet starve, for lack of opportunity."
At least one witness at the hearing put the blame for the delay squarely at the feet of the SEC. Georgetown University finance Prof. James J. Angel testified that "The commission has shown a pattern of antipathy toward the idea of crowdfunding from the beginning and is in great danger of killing the idea through regulatory delay and over- regulation."
In addition, on Wednesday, April 17th the House Committee on Financial Services will be holding a hearing provocatively entitled, "Examining the SEC's Failure to Implement Title II of the JOBS Act and its Impact on Economic Growth."
In the mean time, Forbes blogger David Drake in a recent post forecast the possibility that Italy will overtake the U.S. in equity-based crowdfunding. (Apparently regulators in Italy have made more progress than their counterparts in the U.S. when it comes to implementing crowdfunding).
It goes to show how far the concerns of U.S. lawmakers and regulators have shifted when securities laws in Italy are more friendly to business than those in the U.S.
What if Congress passed a law but no one listened?
That seems to be what happened with the JOBS Act passed by Congress and signed by the President last year.
The "Jumpstart Our Business Startups Act" (H.R. 3606) was passed by the House of Representatives in March 2012 with an overwhelming vote of 380 to 41. The measure had previously passed the Senate with a bipartisan majority.
President Obama signed the Act a few days later calling it a "game-changer" and that the measure "represents exactly the kind of bipartisan action we should be taking in Washington to help our economy."
The Act amended the Securities Act of 1933 in several respects, including by creating a new exemption from registration to allow small business to raise funds via sales of securities directly to the public through a "crowd-fund portal". This new entity - the crowd-fund portal - was to be defined by regulations promulgated by the SEC. According to the President, "Because of this bill, start-ups and small business will now have access to a big, new pool of potential investors -- namely, the American people. For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in." (For a crowdfunding backgrounder, see Dara Albright's site).
Among other changes to securities laws, the Act opened the door for private companies to publicly advertise the availability of investment opportunities in their securities (a practice known as "solicitation" and previously banned under the Securities Act of 1933). Removing the ban on solicitation was intended to make it easier for private companies to locate potential "accredited investors" who would be qualified to invest in exempt offerings of their securities under Regulation D.
Knowing that it would be necessary for the SEC to promulgate regulations to implement these changes, Congress specifically obligated the SEC to adopt rules promptly. In Section 201 of the Act Congress required the SEC to "revise its rules" with respect to the ban on Regulation D solicitations "not later than 90 days after the enactment of this Act."
Also, in Section 301 of the Act, Congress required the SEC "not later than 180 days after the enactment of this Act" to issue such rules as may be necessary to carry out the amendments contained in Section 301 of the Act.
Despite these clear instructions, nearly a year after passage of the law, the SEC has failed to implement these regulations. When pushed for an explanation, SEC appointees have suggested that they disagree with the law's aims and fear that it will harm their "legacy." (WSJ; Wired).
Does it bother anyone else that the SEC believes it is entitled to pick and choose which laws it has to follow and that it does so on the basis of the perceived "legacy" that its political appointees believe they have?
(Cross-posted from PointOfLaw).
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