Washington, D.C., October 23, 2013 –Rep. David Schweikert (R-AZ) issued the following statement on news that the U.S Securities and Exchange Commission will release a proposal today for rules legalizing crowdfunding as mandated by the 2012 Jumpstart Our Business Startups Act.
“I am eager to review the SEC proposal on crowdfunding. These rules are long overdue,” said Schweikert, original co-sponsor of the JOBS Act. “The Act passed by Congress calls for new opportunities for capital access that will promote the establishment, growth and funding of new ventures and entrepreneurs. As we analyze the rules, we hope the SEC has avoided new burdens that run counter to new capital formation.”
The JOBS Act -passed into law on April 5, 2012- contained a series of measures requiring the SEC to ease rules on how startup businesses gain funding. Nearly two years later, the SEC has implemented only a handful of provisions.
“The SEC delays have been disappointing,” Schweikert said. “It is extremely important to support innovation in capital access for startups and small businesses if we are to grow jobs and expand our economy. Crowdfunding and other micro-funding mechanisms are critical alternatives to traditional funding sources, which have become increasingly unavailable to the typical small business.”
Crowdfunding is a mechanism used by emerging businesses to gain funding for their companies by pooling small contributions from people who fall outside of the “accredited investor” income tests.
Companies currently may only solicit accredited investors with whom they have a prior relationship. Only those who can prove net worth of more than $1 million or income of $200,000 annually are allowed to become accredited investors.
Companies that use crowdfunding today are limited to working on a donation basis or pre-selling products only because of such regulations. The JOBS Act called for the SEC to promulgate rules that would allow investors to receive a small stake in the business in return for their micro-investment. Companies could crowdsource up to $1 million of funding annually without placing themselves or their investors under more stringent SEC registration and reporting requirements.
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