Are all three of the provisions that were ushered in under the JOBS Act to ease restrictions on capital raising actually crowdfunding?
William Beatty, president of the North American Securities Administrators Association (NASAA) and Washington's Securities Director says no.
“While it may be convenient for some to ‘lump’ together [the] three separate JOBS Act's titles as ‘crowdfunding,’ it is not technically accurate,” Beatty said.
Is crowdfunding a concept or a regulatory matter?
“As a concept it could mean anything — reaching local investors to raise capital for small or growing businesses (i.e., funding through the ‘crowd’). As a regulatory matter, federal equity ‘crowdfunding’ is defined and specifically authorized by Title III of the JOBS Act,” and is the law's provision that requires the SEC to issue rules.
“Separately, states have created state equity crowdfunding under state laws and regulations,” he added.
The JOBS Act included other provisions that created capital raising opportunities for small and growing businesses, including Title II (changes to Rule 506 of Regulation D, which deals with private placement offerings to accredited investors), and Title IV (which increased the dollar amount of securities that can be issued over a 12-month period under Regulation A, commonly referred to as Regulation A+), Beatty explained.
These titles, he added, “are distinct and separate from Title III crowdfunding.”
Read "Crowdfunding Will Help Build the New York Wheel" from the October 2015 issue of Investment Advisor.