Emerging Markets Law

Wisconsin Crowdfunding Bill

Posted In Crowdfunding

Following the lead of Georgia and Kansas, lawmakers in Wisconsin have proposed a bill that would adopt a form of intrastate securities-based crowdfunding in that state.  Wisconsin Crowdfunding Bill

Assembly Bill 350, known as the Crowdfunding Securities Exemptions for JOBS Act (or "CASE for JOBS Act") aims to bypass the delay caused by the SEC's failure to implement regulations to permit crowdfunding as required by the federal JOBS Act passed by Congress in 2012.   While nationwide interstate crowdfunding remains stuck behind the SEC's inaction, states like Georgia and Kansas have leapt ahead with intrastate rules that permit crowdfunding by companies organized in their states to investors residing in their states.

The Wisconsin bill would combine many of the features of the Georgia and Kansas rules (which are nearly identical) with some of the features of crowdfunding as envisioned by the federal JOBS Act.

Like Georgia and Kansas, the Wisconsin bill would exempt securities issued in purely intrastate transactions in Wisconsin where both the issuer and the investor were residents in that state.

Also like Georgia and Kansas, the Wisconsin bill would allow investments by non-accredited investors up to a maximum dollar amount per issue ($5,000).  Accredited investors, however, could invest any amount.

In a strange twist, however, the Wisconsin bill would adopt a unique definition of "accredited investor" (which is generally defined under Rule 501 of the SEC's Regulation D as either (i) an individual with $200,000 or more in adjusted gross income ($300,000 if married filing jointly) for each of the past two years (and the reasonable expectation of achieving the same outcome in the current year), or (ii) an individual with a net worth of $1 million or more (excluding the individual's principal residence).  Under the Wisconsin bill, however, the income prong of the definition would be reduced to $100,000 (for single investors) and $150,000 (for married investors) while the net worth prong would be reduced to $750,000.  The proponents of the bill have said that this twist is for the purpose of sweeping more Wisconsin residents into the accredited investors definition.

The Wisconsin bill is also noteworthy because it would require its crowdfunded offerings to take place on licensed web portals, much in the way contemplated by the federal JOBS Act.  (In contrast, the Georgia and Kansas rule have no provision for licensing crowdfunding web portals.)

The Wisconsin bill would exempt intrastate offerings of up to $1 million (increasing to $2 million if the issuer has audited financial statements).  Issuers are required to make a notice filing with the Wisconsin Department of Financial Institutions.

As of this writing the bill has been introduced (https://docs.legis.wisconsin.gov/2013/proposals/ab350) but not yet acted upon.

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