A bill modifying equity crowdfunding rules that passed the U.S. House Financial Services Committee on Thursday contains incremental improvements, attorneys say, but some were disappointed that the annual million-dollar fundraising limit wasn’t raised and hope it will be lifted in the future.
Attorneys who follow equity crowdfunding said the overall bill, as now constructed, would modestly improve the landscape but said it would have been far better if it had raised the million-dollar fundraising limit, which some consider too low for the funding to make a meaningful effect.
Other provisions in the bill have also attracted criticism. McCarter & English LLP counsel Benjamin Hron said he was less concerned with the fundraising limit than with SEC disclosure rules required of crowdfunders, which require accountant-reviewed financial statements, ongoing reporting requirements and other things. Those mandates are reasonable for mature startups, Hron said, but an infant-stage company will find the SEC’s compliance regime more burdensome.
Those concerns are not addressed in this bill, Hron said, which he added is likely to benefit more developed companies.
“The promise of the JOBS Act was supposed to be giving access to true, seed-stage capital for these early startups,” Hron said. “Those early startups, basically by definition, don’t have the resources to comply with the crowdfunding rules right now.”