While Congress and the President enacted the crowd-funding legislation called The Jumpstart Our Business Startups Act (or, simply, The JOBS Act) in April 2012, the “jumpstart” speed of the release of proposed regulations attached to the act turned out to be a year slower than the law instructed. Ironically, the law is intended to encourage funding of U.S. small businesses by easing various securities regulations.
According to Robb Mandelbuam on NYTimes.com’s You’re the Boss Blog, the rules and regulations were finally released by the Securities and Exchange Commission last Wednesday and came in at 585 pages.
The JOBS Act was an effort to get more capital, mostly in the form of stocks and bonds, into growing companies. It established a securities crowdfunding industry modeled on the work of (internet) platforms like Kickstarter, which raises money as donations or in exchange for perks or rewards. Under the law, small companies can raise relatively small amounts of money — up to $1 million a year — through financial intermediaries from many small investors, without the expense of becoming publicly traded.
The rules proposed on Wednesday handed a partial victory to industry backers. Though the law places limits, tied to income and net worth, on how much a person can invest in crowdfunded offerings in a year, intermediaries can rely on investors to vouch for themselves. Anything more rigorous, the intermediaries had claimed, would stifle the new industry. While the rules require intermediaries to provide educational material to investors on the nature and risks of crowdfunding, they leave how to do that up to the sites.
Read the entire blog post: “A Year Late, S.E.C. Weighs in With 585 Pages of Crowdfunding Rules” (NYTimes.com, You’re the Boss Blog)