December 5, 2014

Small Business: House Passes Two Bills

Earlier this week, the House passed two bills that have now moved to the Senate:

– “Disclosure Modernization and Simplification Act” (HR 4569, sponsored by Rep. Garrett) – directs the SEC to study ways to simplify financial reporting for small and emerging growth companies & would permit public companies to include a summary page of all material information in 10-Ks.

– “SBIC Advisers Relief Act” (HR 4200, sponsored by Rep. Luetkemeyer) – amends ’40 Act to reduce regulation of advisers to Small Business Investment Companies, which are professionally-managed investment funds that finance small businesses.

Stats: Small Business Liquidity, Reg D & Accredited Investors

These interesting presentations from the recent “SEC’s Small Business Capital Formation Forum” have been posted:

– “Secondary Market Liquidity for Small Businesses” – Stan Keller, Edwards Wildman

– “Capital Raising Through Regulation D” – SEC’s DERA

– “Accredited Investor Pool” – SEC’s DERA

– “Equity Crowdfunding Under Title II of the JOBS Act: The First Year” – OfferBoard (from a MoFo blog – not the Forum)

This MoFo blog by Stephanie Uhrig notes that the Forum considered adding qualitative requirements to the “accredited investor” definition. And here’s a blog from the “Crowdfunding Insider” entitled “SEC Government – Small Business Forum: A Tale of Two Gatherings.”

Transcript: “Reg D Offerings: What Is Happening Now”

We have posted the transcript for our recent webcast: “Reg D Offerings: What Is Happening Now.”

Crowdfunding: Some States Have Opened the Doors

In this column, Professor Davidoff Solomon posits how the SEC’s delay in adopting crowdfunding rules has allowed individual states to do so, permitting a smaller scale test of whether it works. At the ABA meeting, I happened to talk to a few folks in states where crowdfunding is legal and people really are using the sites to invest. Here’s a few (& here’s a list of all the crowdfunding sites I am aware of):



Spark market

Here’s a note from Bob Dow of Arnall Golden Gregory:

This is an interesting social experiment on several levels, but one area to focus on will be the effect on the incidence of fraud. Those who believe crowdfunding is a train wreck would say that there will be rampant fraud. Those who believe in crowdfunding would say this will revolutionize fundraising and lead to an explosion in entrepreneurship. If these web site get some traction, we can see the two hypotheses play out.

I see the questions as much more subtle. I assume there will be more fundraising and probably some additional incidences of fraud. Is the benefit to the economy of the additional fundraising worth the cost to society of the incremental fraud? Are there other ways to prevent the fraud (focused enforcement, etc.) so as to avoid the need to shut down crowdfunding, or make it so restrictive as to effectively eliminate it?

– Broc Romanek