The legislative process has been compared to sausage being made. That was certainly the case with Regulation Crowdfunding, the provision of the JOBS Act that allows for mainstream investment crowdfunding open to all investors. In their desire to protect mom & pop investors, lawmakers modified the original bill in ways that made it too cumbersome to be useful. In other words, sausage that nobody really wants to eat.
With Regulation Crowdfunding (also known as Title III) barely two months old, the House Financial Services Committee on July 5 passed a bill that would fix at least one of its more glaring flaws: the inability to group investors into a single entity. The original bill proposed raising the amount of money that companies can raise under the provision to $5 million from $1 million, but that did not make it into the final bill passed by the House. The Fix Crowdfunding Act was one of three bills dealing with financial services that passed with bipartisan support.
That’s good news for crowdfunders, but don’t get too excited: the Senate is unlikely to take up the crowdfunding bill until next year. The following is a summary of the bills provided by the House Financial Services Committee.
H.R. 4855, the “Fix Crowdfunding Act”
Sponsor: Rep. Patrick McHenry (R-NC)
H.R. 4855, the “Fix Crowdfunding Act,” would amend provisions in the securities laws governing crowdfunding to raise the dollar amount limit and to clarify certain requirements and exclusions for funding portals. This bill fixes some of the problematic requirements and limitations included in the final crowdfunding rule promulgated by the SEC pursuant to Title III of the Jumpstart Our Business Startups (JOBS) Act.
H.R. 4855 will increase retail investor participation in crowdfunding by allowing them to pool their resources alongside sophisticated investors to create a special purpose vehicle (SPV). H.R. 4855 authorizes specific purpose vehicles to invest in startups through crowdfunding.
H.R. 4855 passed the Financial Services Committee on June 15, 2016 by a vote of 57-2. The bill passed the House on July 5, 2016 by a vote of 394-4.
H.R. 4854, the “Supporting America’s Innovators Act of 2016”
Sponsor: Rep. Patrick McHenry (R-NC)
H.R. 4854, the “Supporting America’s Innovators Act of 2016,” enhances angel investors’ ability to provide critical funding to small businesses and entrepreneurs in need of investment capital. Under current law, the number of investors in an investment company fund must be limited to 100 in order for the fund to be exempt from the costly Securities and Exchange Commission (SEC) registration process. H.R. 4854 raises the limit on the number of individuals from 100 to 250 who can invest in certain venture capital funds before those funds must register with the SEC as investment companies.
H.R. 4854 passed the Financial Services Committee on June 15, 2016 by a vote of 57-2. The bill passed the House on July 5, 2016 by a vote of 388-9.
H.R. 4538, the “Senior$afe Act of 2016”
Sponsors: Reps. Kyrsten Sinema (D-AZ), Brue Poliquin (R-ME), and Mick Mulvaney (R-SC)
This bill helps to identify and stop financial abuse of senior citizens. Specifically, it provides that banks, credit unions, investment advisers, broker-dealers, and insurance companies and certain supervisory, compliance and legal employees of these entities would be protected from civil or administrative liability as long as these employees received training in how to spot and report predatory activity and disclose any possible exploitation of senior citizens with reasonable care to state or Federal regulatory and law enforcement entities.
H.R. 4538 passed the Financial Services Committee on June 15, 2016 by a vote of 59-0. The bill passed the House on July 5, 2016 by voice vote.