Almost two years after President Obama signed the JOBS Act, the Securities Exchange Commission formally released its proposed rules for equity crowdfunding on Oct. 23. These rules mimic those originally proposed in the JOBS Act and are currently in a 90-day public commenting period before the finalized version is issued.
AEO, an organization that creates economic opportunity for underserved entrepreneurs and one of our sponsors for Access to Capital: Money to Mainstreet, is a strong supporter of the JOBS Act and has worked hard to ensure proper security measures are in place while maintaining practicality and feasibility for small business owners.
While the proposed rules are almost identical to the JOBS Act, leaving some commentators—like this CNN blogger—wondering what took the SEC so long, they meet some concern from other ends of the crowdfunding spectrum.
Some current and future funding portals could cease to exist because of an intensive registration process that will be required, according the New York Times blog post, A Year Late, S.E.C. Weighs in With 585 Pages of Crowdfunding Rules. They might also be limited in the companies that are listed on their Web site. This is a welcomed restriction for many who believe that in a securities business, portals should be treated like a broker/dealer. On the other hand, this is limiting the potential of portals that are run by Internet and professionals, not securities professionals.
Others are skeptical that equity crowdfunding won’t be an economical option for small business owners because of the legal fees and other added costs. Jeff Bekiares, chief operating officer of SparkMarket, a crowdfunding platform that operates using intrastate crowdfunding in the state of Georgia, is one of these skeptics.
“This is too complicated,” he said. “It is too expensive especially for small businesses. Anybody who is raising under $500,000 is going to have a very hard time.”
SparkMarket has taken advantage of Georgia’s state crowdfunding regulations that are outlined in a mere two pages compared to the 585-page SEC document, and his funding portal meets all of the regulations named by the SEC.
In Seattle, Mary Juetten, founder of Traklight, touched on the proposed rules while participating in the crowdfunding panel at Access to Capital.
AEO intends to take advantage of the public commenting period before it expires on Feb. 3 and requests for members to share opinions and concerns to be included in their comments to the SEC. If you are not a member of AEO and would like to respond to the proposed rules, the SEC is accepting comments here.