Amendment Headlines Package of Proposals to Help Boost Economy, Create Jobs and Bolster Small Businesses
Improves Investor Protections in Bill
The U.S. Senate today adopted a bipartisan amendment introduced by Colorado U.S. Senator Michael Bennet and Senators Jeff Merkley (D-OR) and Scott Brown (R-MA) to help expand investments in Colorado small businesses and start ups. The Senate adopted the amendment to the Jumpstart Our Business Startups (JOBS) Act by a vote of 64-35.
Following adoption of Bennet’s amendment, the Senate passed the overall JOBS Act, which has also been passed by the House of Representatives.
The amendment, which is based on the Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure (“CROWDFUND”) Act, would address the difficulties small businesses, young businesses and start-ups face in securing capital, compared with larger companies, by allowing them to raise capital from individual investors online and through social media.
“Crowdfunding is an important way to harness potential investments in small businesses and start-ups in Colorado and across the country,” said Bennet. “This amendment will help bring our securities regulations into the 21st century while driving innovation, promoting job growth and supporting small businesses in a way we have not seen before.”
The crowdfunding principle is already at work online on websites, such as Kickstarter, which rely on bunches of relatively small dollar participants for their success. Kickstarter, which supports artists and film productions, disburses funds for a given project only once all necessary funding has been secured. In crowdfunding for business investment, a start-up venture would publish information on its proposed business and invite potential small investors to offer capital. Once pledges for a project reach a predetermined threshold, the deal would move forward.
Bennet’s amendment improves the bill by adding common-sense investor protections, including disclosures about a company’s financial condition, its business plan and potential conflicts of interest. It also provides stronger oversight of crowdfunding intermediaries.
Bennet took to the Senate Floor today to call for passage of his crowdfunding amendment. For video of his remarks, click here or on the image below.
During a Senate Banking Committee hearing that Bennet chaired on capital formation proposals, Tim Rowe, founder and CEO of Cambridge Innovation Center, said that last year Kickstarter raised funds equal to about half as much for the arts as the entire National Endowment for the Arts did, demonstrating the great potential of crowdfunding.
Normally, when a company seeks financing from the public, it must register with the Securities and Exchange Commission as a broker-dealer, which may not be practical for many crowdfunding intermediaries. This amendment would provide a more streamlined and less burdensome registration process, allowing companies to raise up to $1,000,000 annually through crowdfunding on registered internet websites.
The National Small Business Association, the Consumer Federation of America and the American Sustainable Business Council are among the groups that have endorsed the CROWDFUND Act.