Crowdfunders Step Up Lobbying for SEC Rules

Crowdfunders Step Up Lobbying for SEC Rules
Image credit: Joy Schoffler
Doug Ellenoff, a partner at lawfirm Ellenoff, Grossman & Schole, speaking at the National Press Club in Washington about how the crowdfunding community has taken necessary precautions to protect investors.

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Crowdfunding advocates raised the volume today on their call to push the Securities and Exchange Commission to finalize rules needed for business owners to raise equity through crowdfunding.

"This is a story about capital," said Sherwood Neiss, principal of consulting and advisory firm Crowdfund Capital Advisors and a chair of the not-for-profit crowdfunding organization Crowdfunding Professional Association. He was one of about a dozen crowdfunding supporters making their pitch at the National Press Club in Washington, D.C., today. 

The SEC has already missed several deadlines to write rules to structure the implementation of the Jumpstart Our Business Startups Act, known as the JOBS Act.

SEC spokesperson John Nester said in an email that Commission is working on the rules among other priorities and that they'll be done "as soon as possible," but it is putting an "emphasis on getting them right."

Related: Crowdfunders Press the SEC: What Is Taking So Long?

"We can not move without the SEC’s help," said Candace Klein, the CEO of SoMoLend, a debt platform to help local communities support the small businesses in their neighborhood, and a co-chair of the Crowdfunding Professional Association. The next step would be for the Commission to issue proposed rules for public comment before voting on a final version.

Klein expects "some kind of movement" toward the end of this year, but there is continued uncertainty as to whether the JOBS Act rules will be handed down for public comment before or after Mary Jo White officially takes over as SEC Commissioner later this year. 

Klein says that members of the Crowdfunding Professional Association have met with SEC officials at least 30 times to help them understand crowdfunding and the protections already in place and the precautions that the industry is taking.

Related: Loans, Contracts and Jobs: How Federal Spending Cuts Could Affect You

For example, one fraud-prevention service available to crowdfunders is CrowdCheck, which provides a background report to all investors in a clear and readable manner. CrowdCheck founder Sara Hanks, a securities lawyer with 30 years' experience, says she is working to dispel the concern that entrepreneurs using crowdfunding "are going to defraud our grandmothers." Chris Tyrell, the Principal of Nehemiah Investments, a family investment office in Princeton, N.J., pointed out that equity crowdfunding has already been happening across the globe with very high success rates.

The JOBS Act, passed in April, will allow entrepreneurs to sell a portion of their company equity to anyone with the cash and the interest, not just restricting investments to accredited investors as under the current law. It also would lift a ban that prevents entrepreneurs from publicly soliciting money.

Related: Entrepreneurs Like Obama's Call for Tax Reform, Immigration Overhaul and Deficit Accord -- Minimum-Wage Hike, Not So Much

Have you raised money for your business with crowdfunding? If so, what was your experience like? Leave a comment below and let us know.

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