Advocacy hosts Small Business Roundtables on Final Crowdfunding Rule in Colorado
By Dillon Taylor, Assistant Chief Counsel
On August 11, Advocacy participated in two small business roundtables in Denver, CO to discuss topics and receive feedback on regulatory issues impacting small business. The events were held at the Colorado Association of Commerce and Industry (CACI) Denver Office and Colorado Small Business Development Center (SBDC). At the small business roundtables, myself, and Regulatory Economists Lindsay Scherber and Jonathan Porat made presentations on the Securities and Exchange Commission’s (SEC) final rule for crowdfunding as well as other securities rules related to capital formation for small business.
Assistant Chief Counsel Dillon Taylor (third from left) speaks at a small business roundtable in Denver, CO.
The term “crowdfunding” is used to describe the collective effort of individuals who pool funds, often via the Internet, to provide capital to another individual or business. Rewards-based crowdfunding, which has been in existence for years, occurs where contributions are exchanged for a “gift” of current or future of goods or services. The SEC final rule, which became effective on May 16, 2016, permits equity-based crowdfunding. Under this equity model of crowdfunding, startups and small businesses may raise capital through securities offerings using the Internet or broker-dealers.
Advocacy was involved during the crowdfunding rulemaking process. On October 23, 2013, the SEC issued the proposed rule to prescribe requirements governing the offer and sale of securities through crowdfunding. After the SEC issued the proposed rule, in 2013 and 2014, Advocacy hosted two small business roundtables and several telephone conference calls to receive feedback on the proposal. Based on these meetings and phone calls, Advocacy submitted a public comment letter to the SEC on January 16, 2014.
(From left to right) Assistant Chief Counsel Janis Reyes, Chief Counsel Darryl L. DePriest, Federal Policy Director for CO Association of Commerce and Industry Leah Curtsinger, Regional Advocate John Hart, Regulatory Economist Lindsay Scherber, Assistant Chief Counsel Dillon Taylor, and Jonathan Porat take time away from meetings in Denver to snap a picture.
The final crowdfunding rule allows startups and small businesses to raise up to $1 million in a period of a year. All offerings must be made via broker-dealer on web portal intermediary. I noted how Advocacy’s participation in the rulemaking process helped shape the SEC final rule. For example, in the final rule, the SEC adopted Advocacy’s suggestion to not require audit financial statements if the company is doing a crowdfunded offer for less than $500,000.
Following the presentations, we answered a number of questions from small business owners and representatives about the final crowdfunding rule. Additionally, the feedback that I received will be helpful to Advocacy in setting its priorities related to capital formation issues for small business. For more information, feel free to contact me at Dillon.Taylor@sba.gov or visit the Office of Advocacy’s website.