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Tuesday, 15 November 2011

US Crowdfunding Bill

"It's time for reflection..." FT.com
Further to my recent post on a new regulatory model for retail finance, the US House of Representative has passed a Bill HR 2930 (still subject to Senate and Presidential approval) which would enable the issuer of securities to raise small amounts of money from many people (crowdfunding) on the basis summarised below. Please note that I've used the helpful summary from VentureBeat, but replaced "company" with "issuer", as I see no reason on my reading of the bill and the definition of "issuer" in the Securities Act 1933 why this would not enable person-to-person lending, rather than merely raising capital for corporations. However, I'm not a US securities lawyer, and you should seek your own independent legal advice ;-)
  • "The [issuer] may only raise a maximum of $1 million, or $2 million if the [issuer] provides potential investors with audited financial statements.
  • Each investor is limited to investing an amount equal to the lesser of (i) $10,000 or (ii) 10% of his or her annual income.
  • The issuer or the intermediary, if applicable, must take a number of steps to limit the risk to investors, including (i) warning them of the speculative nature of the investment and the limitations on resale, (ii) requiring them to answer questions demonstrating their understanding of the risks, and (iii) providing notice to the SEC of the offering, including certain prescribed information.”
As mentioned previously, it would be great to see this sort of support for alternative finance from the UK authorities.