Crowdfunding: SEC Meeting June 14th – Report
We had a very productive hour long meeting at the SEC Wednesday afternoon. Five SEC personnel, led by the Senior Special Counsel to the Director of the Division of Corporation Finance actively listened to ASBC?s ideas on how to move forward with crowdfunding regulations that would both protect the investors from fraud while minimizing the requirements of the portals and the issuers to maximize the potential of investing in local community businesses.
We presented a list of recommendations addressing transparency, open communications, screening issuers using objective criteria, 3rd party ratings of issuers, non-integration of crowdfunding offerings and other security offerings.
However, the most discussed recommendation was for creating a two-tier of rules for crowdfunding with less onerous rules for maximum individual investments of $100 and maximum raises of $100,000 (the original 2010 proposal to the SEC). This was a very energetic discussion with some resistance from the SEC personnel citing compliance with the statute. Our advocates argued strongly that the law did allow for scalable rules based on investor risk (a position re-affirmed to me later in the day in my meeting with Andy Greene of Senator Jeff Merkley?s office which crafted the crowdfunding provision in the JOBS Act).
ASBC is to provide to the SEC through its online commentary site our proposal for a two-tier regulatory approach that includes the criteria for the lower tier, which rules can be scaled down with citation from the statute and the process of required information filing for the lower tier.
Michael Shuman and Jenny Kassan have been tasked with developing the proposal within the next two weeks. The proposal will be circulated for comment before finalized and given to the SEC.
Attending the meeting in person were: David Levine, Frank Knapp, Michael Shuman, Terry Mollner, Fran Teplitz, William Cunningham, and Claiborne Booker. Attending by phone were: Jenny Kassan, Hazel Henderson, Stuart Valentine and Ellen Shepard.