SEC Proposes Regulation to Implement JOBS Act Crowdfunding Offering Provisions
By MICHAEL L. ZUPPONE
On October 23, 2013, the Securities and Exchange Commission (“SEC”) formally proposed a comprehensive set of regulations entitled “Regulation Crowdfunding” to implement the crowdfunding offering provisions contained in Title III of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), which many have viewed as the centerpiece of the legislative reform that is intended to facilitate capital formation in the United States and democratize an area of investment for which ordinary U.S. investors have been excluded. The SEC has described crowdfunding as “a new and evolving method to raise money using the Internet” where “[i]ndividuals interested in the crowdfunding campaign members of the ‘crowd’ may share information about the project, cause, idea or business with each other and use the information to decide whether or not to fund the campaign based on the collective ‘wisdom of the crowd.’” Title III created an SEC registration exemption (and preempted state securities offering laws) which enable issuers and their intermediaries to engage in crowdfunding offerings to the general investing public. Such offerings may be conducted through publicly accessible internet websites and other mass communication media and many market observers expect innovators to use developing social media strategies to attract potential investors as permitted by the proposed regulation.