Crowdfunding Bill Stuck

Scott Walker recently wrote an article about the House Crowdfunding bill, which has passed in Congress, but is stuck in the Senate. Walker believes that the fears of fraud, originated by NASAA lobbying, are blinding the Senate from its true goals. The current house bill outlines the regulations and oversight that are necessary. Entrepreneurs face great difficulties raising capital, why should we be limited to investing only $500-1,000 annually through online crowdfunding?

“It seems a little crazy to me that you have to be an accredited investor to invest in a company, but you can go to Las Vegas and lose $10,000 at the table in an hour and you don’t have to be an accredited gambler to do that.”

The House Bill

The crowdfunding bill passed by the House lifts all of the foregoing prohibitions and requirements and allows a company to sell securities via crowdfunding sites and/or social networking sites so long as the company (and its intermediary, if applicable) comply with the following key restrictions:

  • The company may only raise a maximum of $1 million (or $2 million if the company provides potential investors with audited financial statements);
  • Each investor is limited to investing an amount equal to the lesser of (i) $10,000 or (ii) 10% of his or her annual income; and
  • The issuer or the intermediary, if applicable, must take a number of steps to limit the risk to investors, including (i) warning them of the speculative nature of the investment and the limitations on resale, (ii) requiring them to answer questions demonstrating their understanding of the risks, and (iii) providing notice to the SEC of the offering, including certain prescribed information. [From Walkers Article]
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