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The JOBS Act: Crowdfunding State By State?

William Carleton, Contributing Editor, VCExperts


Rest assured, when the SEC publishes proposed rules to implement investment crowdfunding under Title III of the JOBS Act, we will be discussing them.

I'll be happy to eat crow, too, should the rules somehow take the unworkable legislation and make a truly useful exemption out of it. (See this post: Three things broken in investment crowdfunding that SEC regulations won't fix.)

But some folks, also not counting on the federal investment crowdfunding exemption to amount to anything, are resolving to take the concept to state legislatures.

Earlier this week Steve Reaser left a comment that he will be pursuing an investment crowdfunding exemption at the state level in North Carolina. He referenced an earlier attempt I made to fix the federal legislation. (You can read that draft - styled as a "do over" of the original McHenry bill – here; note, at that time, I had not yet conceived of the Individual Crowdfunding Account (ICA), which is my current preferred concept as the ICA puts the regulatory protection in the hands of the individual crowdfunding investor.)

I will be pleased to help him.

With regard to Washington State, Joe Wallin has proposed an equity crowdfunding bill. That's another model advocates at the state level can look to.

Keep in mind that the North American Securities Administrators Association, a/k/a NASAA, a trade association of state and provincial securities regulators, cannot be said to a fan of investment crowdfunding. Have a look at this draft model crowdfunding exemption they published for internal consideration among member regulators, at a time when state regulators yet thought they might stop the momentum of the federal legislation.

Also keep in mind that the federal legislation is designed to permit the states to take over federal oversight of Title III funding portals, to the extent the states adopt the federal framework.

So there are reasons to think state regulators, in general, will not welcome meaningful, workable crowdfunding exemptions in their respective states.

State legislators? That could be a different matter.


William Carleton

Bill is a member of McNaul Ebel Nawrot & Helgren PLLC, a Seattle law firm. He blogs every day at http://wac6.com.