By AnnMarie McIlwain (Contact)
To be delivered to: Elisse B. Walter, Acting Chairman, U.S. Securities and Exchange Commission
Thanks to the JOBS Act, signed into law by President Obama on April 5th, 2012, startups and small businesses will soon have a new way to raise capital—crowdfunding for equity. This will enable entrepreneurs to turn to the people who know them best (friends, family, and neighbors) and invite them to invest in businesses that they may use such as a local bakery, new technology for bicycle wheels, an afterschool (sports/homework) facility for kids with ADD, etc.
As an entrepreneur and founder of CareerFuel.net, I know firsthand how difficult it is to raise capital and why this new alternative source of funding for small businesses and startups is so important. The SEC must write the regulations before this new job growth engine can be launched. Given the enormity of the job, it was not surprising—but nonetheless worrisome—when SEC Chairman Mary Schapiro testified before Congress that the first deadline (July, 2012) for regulatory structuring will not be met.
Let’s join forces as Americans to let the SEC know that empowering small businesses and entrepreneurs is vital to our communities and country. Tell the SEC that you are counting on them to do what it takes to meet the December 31, 2012 deadline and to create sensible and workable regulations to help fuel job growth in America!
Please copy and paste the following URL into your browser in order to read the crowdfunding part of the JOBS Act:
Please copy and paste the following URL into your browser in order to read the JOBS Act, in full:
Please read below for an outline of the legislation to be implemented:
*Entrepreneurs will be able to offer equity in exchange for investments in their startup or small business. At present, startups can raise an unlimited amount of money using crowdfunding, but they cannot offer equity.
*The Securities and Exchange Commission (SEC) has until December 31, 2012 to create regulations for how crowdfunding will be executed.
*Money can only be raised through a Broker or Internet “funding portal” registered with the government and in compliance with Section 4A(a).
*Monies raised are dispersed if they achieve their stated goal.
*Entrepreneurs can raise $1M every 12 months until they reach $10M in total assets.
*The entrepreneur can decide how much equity is being offered in exchange for the total investment being raised.
*The SEC will need to rule on whether any or all crowdfunding investors will count toward the 2,000-investor limit that triggers the requirement for a company to register its common stock and become a publicly reporting company.
*Any person who owns 20% or more of the company stock will be required to go through a background check, the details of which will be made public on the crowdfunding site (e.g., credit history, tax liens, etc.).
*Money raised through family and friends prior to the first crowdfunding round will need to be disclosed.
*Investors will be limited to a total annual investment based on their net worth. For those with annual income of less than $100,000 or equivalent net worth, investments are limited to the greater of $2,000 or 5% of their income/net worth. For those whose annual income/net worth exceeds $100,000, they can invest 10% or up to $100,000.
*Regulations will require platforms to use a pop-up box, where investors will read disclaimers and take a quiz ensuring that they understand the high risk associated with such an investment.
*Entrepreneurs will be limited to solicitation via existing social media contacts (e.g. email, Facebook, Twitter, LinkedIn, Pinterest). After the initial communication announcing a crowdfunding campaign, all messaging with social contacts will be conducted and catalogued on the campaign site.
*Investments will be tracked by affinity circles (i.e., 1st degree is someone from the entrepreneur’s LinkedIn, Facebook, Twitter, etc. connections, a 2nd degree affinity is someone from a 1st degree connection and 3rd degree affinity is someone completely unknown to the entrepreneur but who came to the crowdfunding site).
Note: MoveOn Civic Action does not necessarily endorse the contents of petitions posted on this site. MoveOn Petitions is an open tool that anyone can use to post a petition advocating any point of view, so long as the petition does not violate our terms of service.