Entrepreneurs Watch As Crowdvesting Bill Stalls In Senate

cayenne8 writes "The JOBS Act bill, passed in the house, has stalled in the senate. One section of this bill, which would legalize 'Crowdsourcing' in the U.S., as it is in other countries, allowing companies and startups (like indie film makers) to solicit investments for profit over the internet. This differs from sites like Kickstarter, which allow you to only donate money, in that this bill will allow the common citizen to invest for potential profit ($10K or 10% of income for investor limits) in new ideas and companies."

Comments

Actually, it's now been passed with amendments

[webplay]

http://www.nytimes.com/2012/03/23/business/senate-passes-start-ups-bill-with-amendments.html?_r=1&hp

Re:Actually, it's now been passed with amendments

[sexconker]

The House bill would allow individual investors to invest up to $10,000, or 10 percent of their annual income a year, whichever is less. The Senate bill would limit those investments to the greater of $2,000, or 5 percent of either annual income or net worth, if either figure is less than $100,000.

So for those of us in the $50k-$100k category that limits the investment to $2,500-$5000 instead of $5,000-$10000.

Doubles the number of investors needed.

A bit odd, that, since 10% of yearly income, while significant, isn't exactly something that should break you financially. Seems a bit overcautious.

It's not cautious, it's designed to prevent you from profiting off of investments or funding your business outside of a major stock exchange.
Any American investments greater than 1 pittance must first be taxed by banks and stock brokers, then left in their control to fuck up.

You're not unamerican, are you?

Scam?

[koan]

"Of course, supporters don’t describe it that way. They say the JOBS Act — for Jumpstart our Business Startups — would remove burdensome regulations that they claim have made it too difficult for companies to raise money from investors, impeding their ability to grow and hire.

Never mind that reams of Congressional testimony, market analysis and academic research have shown that regulation has not been an impediment to raising capital. In fact, too little regulation has been at the root of all recent bubbles and bursts — the dot-com crash, Enron, the mortgage meltdown. Those free-for-alls created jobs and then imploded, causing mass joblessness. "
https://www.nytimes.com/2012/03/11/opinion/sunday/washington-has-a-very-short-memory.html?_r=3&partner=rssnyt&emc=rss

Re:When was it made illegal?

[blakelarson]

Crowdsourcing in general is illegal because of hucksters tricking people out of their investment dollars. Only when you have a detailed, SEC-approved prospectus can you sell shares publicly as a C-corp. This is an expensive endeavor for small operations. So they raise "private" money, but mostly from accredited investors, who are supposedly rich enough to not do stupid things with their money. Or at least have the resources to sue the people running the company. Kinda arbitrary. But the key is that a company cannot publicly solicit investors. I think that crowdsourcing is a great idea, but we need to be sure to cover the potential for abuse. There's a reason the laws are in place. I'd love to be able to raise some cash this way.

Outdated information

[TubeSteak]

http://news.cnet.com/8301-1001_3-57402589-92/jobs-act-clears-senate-one-step-from-becoming-law/

The JOBS Act has passed the Senate. In a 73 to 26 vote today, an amended version of H.R. 3606, which opens startup investing to individuals ("crowdfunding") and gives young companies more flexibility in filing to enter the public stock markets, cleared what is probably its last major hurdle before becoming law.

I'm really surprised that it passed the Senate as the JOBS act is chock full of poorly thought out deregulation.
It's so bad that the head of the SEC has come out against it and State securities regulators are against the bill

If this bill becomes law, it'll directly lead to the next wave of investor fraud.

Re:When was it made illegal?

[Anonymous Coward]

That is exactly what the Senate amendments to the bill address: http://www.crowdsourcing.org/editorial/a-look-at-the-proposed-amendments-to-the-crowdfunding-bill/12669

The gist of the amendments (which I believe just passed) tighten up the certification and disclosure rules, the requirements for investors (based on annual income), and some important arcana on who is allowed to advertise these things (e.g., no pump-and-dump schemes.) The amendments strike me as a fairly good idea-- if you're asking for a half a million dollars from random people you don't know, then, yes, you're gonna get a CPA to certify and publicize your finances.

With those amendments, the overall idea also strikes me as a good idea. Sanity seems to have prevailed, assuming the House approves the amendments.

Re:When was it made illegal?

[Animats]

Crowdsourcing in general is illegal because of hucksters tricking people out of their investment dollars.

Right. There is a long, long history of investment scams, from John Law's bank to Florida real estate to "High Yield Investment Plans. The current big scam thing is "distressed real estate". That's why we have SEC registration and mandatory disclosures. Here are some recent scams of that type.

"Crowdfunding" is about selling unregistered securities to individuals. This usually ends badly.

If anything, the rules on who is a "qualified investor" and can invest in private placements should be tightened up. At present, pension funds are considered "qualified investors", which means they can invest in hedge funds. That didn't work out too well around 2008.