Entrepreneurs are ecstatic. State regulators, not so much. Rep. Patrick McHenry, R-S.C., introduced a bill touted as a job creator that would allow would-be business founders to finance their startups through crowdfunding, a medium that has been used for thousands of projects already, albeit predominantly for such artistic ventures as new CDs or films—with financiers contributing small amounts and often getting nothing larger than a CD or t-shirt, if anything, in return for their investments.
H.R. 2930, the Entrepreneurial Access to Capital Act, however, could change all that—and already the alarm bells are ringing. The bill, introduced in September, was approved by the House Financial Services Committee and is heading for a vote, but its controversial removal of an SEC rule that makes it more difficult for companies to raise money through small contributions has state regulators seething.
Under the terms of the legislation, new business entities could use crowdfunding to raise and combine donations of up to $1 million and not have to register with the SEC.
McHenry, who sponsored the bill, said of the measure in a report in The Hill, “Outdated regulations are getting in the way of innovative ideas making it from the dinner table to the production line. This legislation will give small businesses and entrepreneurs access to the capital they need to expand, compete and—most importantly—hire.”