Equity Crowdfunding and the JOBS Act


In April 2012, excitement rippled through the business community. That’s the day the JOBS Act was signed into law and its goal was simple – to help small business and startups be able to create more jobs for Americans. Statistics like 98% of all jobs come from small business opportunities, so the bill made sense. It would open doors.

Except that those doors never opened. Businesses in the JOBS Act were supposed to be able to raise up to $1 million from non-accredited investors through crowdfunding platforms by the end of that year. That portion of the law is referred to as Title III. 2015 has begun and the final rules have not yet been published by the SEC.

Equity crowdfunding remains in limbo.

Kendall Almerico, a leading attorney on the subject, is confused by the hesitation to publish rules that are clearly going to benefit the economy. He wonders why the SEC isn’t being held accountable for their lack of effort to bring Title III to a reality. Most people who were 3 years late on something would be held accountable in some way, right? The SEC is, unfortunately, not most people.

Weren’t Rules Published In 2013?

The SEC did bring forth some proposed rules for equity crowdfunding in October 2013. There were 585 pages of proposed rules, in fact, but they key word there is “proposed.” Nothing was finalized, which means equity crowdfunding on a national level with non-accredited investors can’t happen until those rules become formal.

There’s no denying that the SEC needs to tread carefully here. They have responsibilities to the investor, the business, and to avoid fraud whenever possible. There’s one chance to get this right from the start. Being careful is one thing. Being so slow that other countries have been doing equity fundraising for almost a year at the start of 2015? That’s unacceptable.

Is it any wonder why people are starting to ask if Title III of the JOBS Act is every going to happen?

It’s Probably Going To Be 2016… Maybe

Here’s what we do know. The SEC has set equity crowdfunding rules on their rule making agenda for October 2015. Let’s say that everything gets approved in a timely manner and it is smooth sailing from then on. It will still be 2016 before the rules are able to be implemented because they have to be published in the Federal register for a minimum of 60 days before they can be used.

Another year? A lot can happen with the space of a year. Just look at what has happened to the Euro in Q1 2015. It tanked against the dollar. The US is, in fact, one of the strongest economies in the world rolling into 2016, though low- to middle-income households might disagree with the sentiment. Could a European collapse be enough for the SEC to throw up their hands and start from scratch once again?

Or could the JOBS Act stop having bipartisan support and become a bargaining chip for debt ceiling negotiations? Anything is possible. Until those rules come, it’s all still up for debate.

How Soon Is “Soon?”

SEC Chair Mary Jo White has gone on record to say that she’s going to be pushing all of the remaining JOBS Act mandates “in the near term” to finalize the remaining mandates that exist. In other words, they are looking to take care of this sooner rather than later. Does that mean that the SEC could finalize the rules before the October 2015 date that many are expecting right now?

Once again – anything is possible. There’s at least hope now because the SEC is actually talking about equity crowdfunding once again.

It’s not just the American economy that needs this. It is entrepreneurs who are looking to raise capital in ways that are unprecedented. It is the small business owners who need a lifeline that is better than a low interest government backed loan. It is the low- to middle-income household that needs a chance to make more money because their incomes have been static since 2008 in some instances.

Title III of the JOBS Act needs to happen… period. 2015 is a year of change for the global economy. The SEC needs to move to make sure the US economy can remain on top. If it doesn’t act, then the uncertainty might be enough to cause the same cascade of problems in 2016 that Europe is seeing right now.