CrowdFunding Explosion! Not Just Yet...

Monday, July 15, 2013

CrowdFunding Explosion! Not Just Yet...

The SEC has made dramatic headway in terms of its eliminating the rule regarding public announcements ("solicitations") by companies of their intent to raise money through the sale of securities such as stock, bonds or other instruments. That bodes well for the U.S/ capital markets in general, and especially for smaller business, such as start ups, technology ventures and small businesses who wish to become capitalized through an initial public offering ("IPO") or something similar.

By the same token, The SEC now has a firm deadline of mid-October by which it must promulgate its rules and compliance standards for smaller, i.e., crowd funded, public offerings of securities over the internet. These are both great strides.

What troubles my colleagues and myself here at CFI CrowdFunding Incubator LLC is that each state has its own securities governing body, generally under that state's attorney general's office, and each state is within its constitutional rights (assuming that the Constitution is still considered relevant by someone in issuing its own individual laws and guidelines with respect to offerings of securities within its jurisdiction.

These "Blue Sky" - like laws will undoubtedly come cropping up like crabgrass in springtime as soon as the October announcements are made by the Securities And Exchange Commission.

An article from a CBS newsbrief follows to shed some further light on the issue:

For crowdfunding, the revolution will be localized

Despite hoopla over the JOBS Act, few believe that national crowdfunding is set to take off -- and states aren't waiting around to find out

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I strongly believe that each state's attorney general will want to have his or her respective say about its own "supplemental compliance rulings" to the JOBS Act. And because of this, interstate offerings, multi-state offerings and national offerings may require compliance with multiple sets of rules, which could be quite expensive (in terms of legal bills), and could make the SEC's rules almost irrelevant. There could even be some interesting legal challenges.

Yes. We are making great strides within the US with respect to crowdfunded online offerings.

But the issue that remains is: What will the states, each respectively, do, in terms of helping with the process, or hindering it. Those of us at The CFI Group Of Companies want to see legislation infused with the original spirit of the JOBS Act -- but whether or not the states' attorney generals will agree is a story yet to be told.

We will be keeping you up to date.

Douglas E. Castle, CEO

Tags, Labels, Keywords, Categories And Search Terms For This Article: JOBS Act, IPO, CFI, Crowdfunding,SEC, crowdfunded public offerings, business, raising capital, funding ventures, Blue Sky, Douglas E. Castle