The JOBS Act became law on April 5, 2012, with the promise to open a new world of funding for startup businesses through equity crowdfunding. Entrepreneurs were excited that Congress passed a law creating a Kickstarter-like tool to raise capital by selling stock online. Equity crowdfunding had promised to bring ideas to life, businesses to fruition and the American Dream back into play.
Then, nothing happened.
Almost two-and-a-half years since the law was passed, there is frustration in the entrepreneurial world because the SEC has not released final rules allowing JOBS Act equity crowdfunding to begin.
Related: Our Progress Report on the JOBS Act
I don’t blame the SEC being extremely cautious implementing the biggest change in securities law in eight decades. Creating an entirely new method of selling securities requires a great deal of thought and planning. This became obvious when the SEC released 585 pages of proposed rules last October. That’s a lot of thought and planning.
Nobody thought we would be waiting almost a year for the final rules to be released so the law can be implemented. Nobody knows how well the law will work until people try to use it. I have repeatedly argued that the SEC should roll the law out, see how it works and let the collective ingenuity of the American people find creative ways to make the law function as Congress intended.
What can you do to help convince the SEC to release the final rules? Here are some suggestions from crowdfunding industry experts:
1. John Robert Clarke, who runs Midtown Partners, a FINRA registered broker-dealer in New York City, is waiting for the final rules to make his entry into the crowdfunding industry and says people should submit a polite letter to the SEC asking them to release the final rules. Clarke says the SEC will take into account each and every comment letter submitted, and they need to know that funding portals are ready to launch as soon as equity crowdfunding becomes legal.
“I’ve been waiting for the final rules so we can formally launch our funding portal FundItNation and let entrepreneurs raise startup capital from the crowd,” Clarke says. “While some have criticized the proposed rules as being unworkable, we have found ways with our portal to make the JOBS Act work for investors and entrepreneurs. We just need the green light from the SEC to launch.”
You can submit a comment to the SEC online by clicking here.
2. Attorney Anthony Zeoli, one of the top real-estate crowdfunding experts in the country, has clients ready to use Title III crowdfunding as soon as the rules are passed.
"The SEC's desire to protect investors is admirable, but failing to issue the rules hasn't stopped equity crowdfounding," Zeoli says. "It has only succeeded in forcing entrepreneurs and portals to pursue a variety of workarounds to make it happen."
He notes that real-estate crowdfunding is one of the places where entrepreneurs are already implementing crowdfunding despite the lack of final rules.
"You have debt/equity investments being made with very little guidance as to how it should be handled from a legal or a regulatory prospective," Zeoli says. "Only by issuing final rules can experienced crowdfunding professionals begin creating best practices for the equity investments that will truly protect investors."
3. Joy Schoffler, principal of Leverage PR and board member of CFIRA, the crowdfunding industry’s advocacy group, says the SEC and Congress members need to be reminded to ignore the naysayers. The critics who claim that investors are not protected and that equity crowdfunding will not produce “the next Facebook” are missing the point, she says.
“I personally invest in some businesses that will never have a Facebook-type exit," Schoffler says. "They are everyday businesses that have great cash flow and make healthy returns. Enacting Title III of the JOBS Act is about allowing all Americans that same opportunity. If you are a sandwich-shop owner with loyal customers and want to open a second location, why not allow the community a chance to own a piece of the business? They will become even more loyal customers.”
4. And some advice from yours truly. Attend a live crowdfunding event such as the Global Crowdfunding Convention and Bootcamp this October in Las Vegas. Listen to crowdfunding industry leaders speak and get educated about the latest developments and network with others who want to see this law up and running.
There is no better place to collectively pool the resources of those who are passionate about finally being able to use this law to bring investors and entrepreneurs together in a way that could change the American economy.