This afternoon U.S. Senators Brown (R–MA), Merkley (D–OR), and Bennet (D–CO) introduced the bi-partisan Crowdfund Act (S. 2190), legislation that would lift much of the regulations restricting the crowdfunding of small businesses and entrepreneurs. Start-ups could solicit up to $1 million per year from individual investors, though they would have to use SEC-accredited platforms to do so. Investors with annual incomes less than $100,000 could invest up to $2,000, or 5 percent of their income. Wealthier individuals would have considerably more freedom; they could invest up to 10 percent of their income, with a cap at $100,000.
The bill represents a significant compromise. Until today Senate Democrats favored a version that restricted crowdfunding investment to a tiny percentage (1 – 2.5 percent) of income, with no exceptions for the wealthy. It also provided for an "individual cause of action" that would allow any single disgruntled investor to file suit against a company. Crowdfunding advocates like Tim Rowe, the CEO of the Cambridge Innovation Center, had expressed concern that this would open a floodgate of litigation, or scare small companies away from crowdfunding altogether. That provision has been replaced with one that would allow individuals to sue only in the case of a "materially misleading misstatement or omission," according to Marné Marotta, one of Sen. Brown's legislative aides.
The bill isn't quite law yet, though. Majority leader Harry Reid had promised to introduce a package similar to the JOBS Act — which included crowdfunding legislation — passed by the house on Thursday. There's been no sign of such a package. "What this signals is that there is now bipartisan support for crowdfunding," said Marotta. "That had been a sticking point." Marotta said that while it was likely crowdfunding reform would be packaged with other bills aiming to help small businesses access capital, it would be introduced on its own if necessary.
The complete bill text is available for viewing below.
Tags: crowdfund-act, crowdfunding, jeff-merkley, michael-bennet, s-2190, scott-brown
