Legislation to change crowdfunding rules for small businesses passed the Financial Services Committee Thursday.
The Fix Crowdfunding Act would amend part of the 2012 Jobs Act, increasing the amount of money a small startup can raise selling securities through crowdfunding from $1 million to $5 million. The bill also would restrict crowdfunding platforms from refusing investors — unless the investors have a demonstrated history of fraudulent or illegal behavior.
“Today our committee will focus on solutions that will more appropriately balance rules with the urgent need to provide small business entrepreneurs with more options to access capital so they can start up, hire workers and grow their companies,” committee Chairman Rep. Jeb Hensarling, R-Texas, said in an opening statement of the Financial Services Committee when the bill was marked up a day earlier.
While the Job Act passed four years ago, it wasn’t until 2015 that the Securities and Exchange Commission adopted rules set out by the legislation on crowdfunding — a method of raising money in small amounts online from lots of investors.
Earlier this week, the free market Competitive Enterprise Institute wrote a letter to committee leadership in support of the bill, saying that it could benefit middle class investors.
“Under the crowdfunding rules of the United Kingdom, for instance, Camden Town Brewery raised 2.7 million British pounds (about $3.8 million) from ordinary British investors. These investors were rewarded handsomely earlier this year when the brewery was purchased by InBev Anheuser Busch, which gave shareholders a 68 percent return with the purchase price,” John Berlau a senior fellow at the institute wrote.