Crowdfunding Gets a Hearing in U.S. House
For Immediate Release Contact: Karen Kerrigan
September 15, 2011 703-242-5840
Crowdfunding Gets a Hearing in the U.S. House
SBE Council Member Neiss Testifies on Modernizing SEC Rules
Washington, D.C. - Small Business & Entrepreneurship Council (SBE Council) member and entrepreneur Sherwood "Woodie" Neiss brings his Crowd Fund Investing (CFI) framework to a congressional hearing today, where there is growing support to modernize outdated securities law that is preventing small business owners from tapping into their networks for raising capital. Today, the U.S. House Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs is hosting "Crowdfunding: Connecting Investors and Job Creators" where they will hear from Neiss and other witnesses on models for crowdfunding. The CFI model presented by Neiss, which includes strong investor protections, has been crafted in conjunction with SBE Council. President Obama included a crowdfunding proposal in his 2011 American Jobs Act based upon this model.
SBE Council President & CEO Karen Kerrigan argues that at a time when entrepreneurs and small businesses have limited sources for accessing capital, the nation needs to reform archaic rules that are hurting U.S. competitiveness, innovation and entrepreneurship. "We need to modernize and tweak outdated rules to allow Americans to invest in promising small businesses. Access to capital is becoming much more difficult and we need to identify and develop effective and modern ways for entrepreneurs to connect with potential funders," said Kerrigan.
(You can access the testimony of Mr. Neiss by clicking here.)
By revamping the Security and Exchange Commission's (SEC's) position on solicitation and accreditation, we can open the doors to capital for small business owners and entrepreneurs. Allowing for an exemption for Crowdfund Investing, which includes prudent protections for investors, will spur innovation, create jobs, and reinvigorate the economy.
As explained by Neiss in his testimony:
"Crowd Fund Investing (CFI) is not permitted by securities laws today but it stands to be a powerful method of financing, where groups of people will come together to invest in startups and provide valuable knowledge and experience to help an entrepreneur succeed. It will provide a way for unaccredited investors to pool their individual small contributions (likely between $50 and $500 each), and invest in companies and entrepreneurs they believe in. The funding rounds will occur on Internet platforms, which provide an added level of transparency and communication between the investors and the entrepreneurs. And 'Micro-Angel Investors' will support people and businesses they believe in and in turn, help to grow the economy."
SBE Council and Neiss (who is spearheading the "Startup Exemption" initiative) support creating common sense modifications to existing regulations to enable small businesses to raise capital. These reforms are modest, follow the spirit of the Securities Act of 1933 and the Exchange Act of 1934 and include:
Strong anti-fraud provisions
Limited risk and exposure for unaccredited investors
Standards-based reporting and
Limit to the amount of seed capital a company can raise
"We are very excited that Congress and President Obama are seeking smart ways to help small business owners and entrepreneurs connect with potential funders. Technology and the Internet have leveled the playing field in so many other areas for entrepreneurs, and it only makes sense that they are allowed to tap into its power for needed capital," Kerrigan added.
SBE Council is a nonprofit, nonpartisan advocacy, research and networking organization dedicated to protecting small business and promoting entrepreneurship. For more information visit: http://www.sbecouncil.org/.