The US equity crowdfunding space is continuing to develop. Last month the SEC passed Title IV of the JOBS Act and since then some States have updated their legislation surrounding crowdfunding. It has recently been ruled that small businesses can use equity crowdfunding as a method of accessing capital in Mississippi.
Secretary of State Delbert Hosemann commented:
“About two years ago the federal government came into play and said, ‘We're going to create the JOBS Act and we're going to allow Internet financing,' and the Securities and Exchange Commission is to write the regulations, they never have so Mississippi's not waiting anymore, we're starting crowdfunding ourselves.”
“Many Mississippians don't qualify to start a business loan, they can't get a loan from a bank now. Those regulations have choked the abilities for Mississippians to create wealth and create jobs by getting a loan to start a small business. I want people to go and be able to start their own business. In Mississippi I think we've got a lot of great opportunities, I can't even envision all of what they'll be, but they'll be a lot.”
This legislation will come into force on 24th May.
“Many of these businesses will fail, we're not saying that they won't fail, businesses fail every day, but some of them are going to be successful that never had the chance to do that. Individuals that did not have individual wealth when they started will now have a chance to live their dream and that's the most important thing, there are a lot of great ideas.”
Over in Minnesota a bill named “MNvest” that will legalize equity crowdfunding has made its way through both the House and Senate, and is now on track to be signed into law by Governor Dayton.
The bill will allow a business to raise up to $2 million from crowdfunding if they agree to an audit by a public accountant, or $1 million if not audited. Significantly the bill also makes it legal to advertise investment opportunities to all Minnesota residents, which will help SMEs access funding faster as well as opening up new investment opportunities.
Ryan Schildkraut, a lawyer at Winthrop & Weinstine and advocate of MNvest, commented:
“We think there are a lot of Minnesotans that want to invest in the next great company. But right now it’s illegal for them do so.”
“The internet has brought down a lot of walls. This is the last one.”
One of the reasons the bill took so long to pass is that there have been many, not unjust, concerns about the implications of opening up equity crowdfunding to non-accredited investors. In late January, Minnesota Department of Commerce commissioner Mike Rothamn sent a letter to Senator Terri Bonoff, a sponsor of the legislation.
“As currently drafted, the Commerce Department cannot support this legislation. I am seriously concerned that Minnesota investors may unknowingly be faced with financial risks and costs without proper disclosure of, among other issues, burdens and limitations.”
At the end of March the SEC voted to implement Title IV of the JOBS Act: Regulation A+. This new legislation, Tier II of Reg A+, has been called “IPO Lite” and allows companies to raise up to $50 million and allows non-accredited investors to be involved in deals. These new rules should become effective by mid-June 2015. This is bringing crowdfunding into the spotlight in the US and the added momentum of some States changing regulations shows that there is great demand from non-accredited investors and small businesses to be able to utilise equity crowdfunding.
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