The SEC has scheduled a meeting for this coming Friday to vote on the final equity crowdfunding rules under the JOBS Act.
The SEC’s notice of the meeting says:
Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94-409, that the Securities and Exchange Commission will hold an Open Meeting on Friday, October 30, 2015 at 10:00 a.m., in the Auditorium, Room L-002.
The subject matter of the Open Meeting will be:
The Commission will consider whether to adopt rules and forms related to the offer and sale of securities through crowdfunding under Section 4(a)(6) of the Securities Act of 1933, as mandated by Title III of the Jumpstart Our Business Startups Act.
The Commission will consider whether to propose amendments to Securities Act Rule 147 and Rule 504.
If you are desirous of doing some reading in advance of this meeting, you can go back and read the proposed rules.
It is great that the SEC is finally getting around to this. Hopefully the SEC makes the process for companies easier in the final rules.
Unfortunately, because of the way the statute was written, I still think equity crowdfunding under the JOBS Act is going to be too complex for most early stage and startup companies.
What are the big hangups under the law?
In my opinion, the big problems are:
- the requirement of audited financials for offerings over $500,000. Given the expense and time and effort involved in doing a crowdfunding offering, it hardly seems worth the effort to do one if you are not raising more than $500,000. If that is the case, then I can’t see a lot of startups and early stage companies taking this path. Instead, I think most will continue to stick to Rule 506(b) or 506(c).
- The requirement that companies pay an expensive intermediary to conduct an offering.
In general, I am a huge fan of the idea of equity crowdfunding. But I am concerned that the rules are going to be too complex and cumbersome for most companies to use.
If you are going to spend the time and effort required to do a Title III equity crowdfunding, perhaps a Reg A+ offering would be a better choice.
In any event, it will be fun to see how things unfold.