As many of you may or may not know, the Fix Crowdfunding Act just passed through the House and is now moving on to the Senate. This may seem strange considering Title III crowdfunding revisions were just made active in May, but, if you know anything about the nuances of crowdfunding, you know it can still be improved. Today, let’s look at what the Fix Crowdfunding Act looks to correct.
The Fix Crowdfunding Act will be making amendments to the Securities Act of 1933 and of 1934, as well as the Jumpstart Our Business Startups Act, both of which greatly influence modern crowdfunding as we know it. These changes will, first and foremost, increase the cap of $1 million to $5 million that can be sold to investors as securities when the issuer qualifies for the crowdfunding exemptions. Next up, we have a bit of legislation to protect crowdfunding portals and increase reliability in the industry via enabling the portals to reasonably disqualify issuers based on a background check wherein they find untrue or omitted facts. Additionally, it protects the portal from liability for an issuer’s mistake. Thirdly, the Fix Crowdfunding Act exempts crowdfunding securities transactions from the Securities Exchange Act of 1934’s registration requirements.
Additionally, the act considers single-purpose funds venture capital funds if they are selling and offering securities according to crowdfunding requirements. Lastly, this act would allow for testing the waters, i.e. an issuer would be allowed to solicit non-binding indications of interest from potential investors before the actual offering was made. This would be huge!
Exciting times are ahead of for the crowdfunding community. Now we have to cross our fingers and hope it sails through the Senate! Stay tuned! If you want to read a summary of the bill yourself, check it out by clicking here.