Kudos to the folks at Murphy & McGonigle and LeClair Ryan for organizing today’s crowdfunding conference at the Omni Hotel in downtown Richmond, Virginia. The audience enjoyed two outstanding panel discussions discussing the current status of crowdfunding laws and proposed SEC rules that emanated from the JOBS Act.
A few highlights and observations:
- A friendly reminder that, contrary to what you might read online, equity crowdfunding remains illegal under existing U.S. securities laws until such time as final SEC rules implementing Title III of the JOBS Act are formally adopted (as compared to existing non-equity crowdfunding platforms like Kickstarter or IndieGoGo which are based on donations by supporters as opposed to equity or debt investments).
- There was a general sense of cynicism that the crowdfunding rules in their proposed form will gain meaningful traction in the private offering marketplace due to the significant compliance burdens and transaction costs, coupled with the various limitations on offering size and investment limits. The new Rule 506(c) exemption (which allows a company to engage in general solicitation and advertising to promote its offering) and proposed enhancements to Regulation A were generally viewed as having much more potential for spurring capital formation.
- An acknowledgement that the SEC has a difficult task of balancing two conflicting mandates–facilitating capital formation and promoting investor protection.
- Crowdfunding has enjoyed meaningful acceptance and success in other countries in recent years, particularly in the U.K.
Suffice to say, we are in the midst of perhaps the most significant shift in the regulation of private securities offerings since Regulation D was first adopted in the early 1980s. Stay tuned for more updates and check out other private offering articles and video clips posted at www.ericperkinslaw.com or www.rvabizlaw.com.