Venture Law Corp | Alixe Cormick (Small Cap Lawyer Blog, NCFA Advisor) | March 30, 2015
This article is an update of two earlier articles:
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Creating, adopting and implementing new laws tend to proceed at a glacial pace. Elected officials and regulators are cautious as even a minor change can have a significant impact on the economy, businesses, and people’s lives.
The federal government of the United States enacted the Jumpstart Our Business Startups Act (Job’s Act) on April 5, 2012. The U.S. Securities and Exchange Commission (“SEC”) issued for comment a new equity crowdfunding rule as required under Title III of the Job’s Act on October 23, 2013. The comment period closed February 3, 2014, and silence has ensued with no clear date when the SEC will issue a revised rule for comment or a final rule.
State legislatures and securities regulators have chosen not to wait for a federal equity crowdfunding rule to emerge. Instead, they have been busy creating, adopting, and implementing their own intrastate* equity crowdfunding exemptions.
On March 18, 2014, five (5) states had adopted an intrastate equity crowdfunding exemption and sixteen (16) states were looking at adopting an intrastate equity crowdfunding exemption.
A year later, March 18, 2015, seventeen (17) states have adopted an intrastate crowdfunding exemption; twenty-one (21) states are looking at adopting an intrastate crowdfunding exemption.
The Governor of one of those pending states just signed its crowdfunding bill and it will become law on June 24, 2015. A second is waiting only for the approval of their state Governor before their intrastate crowdfunding exemption becomes law.
State legislatures and regulators have embraced intrastate equity crowdfunding as evidenced by their participation levels and speed at which they have adopted new legislation.
Funding portals are starting to emerge** and a number of intrastate equity crowdfunding campaigns have closed. Intrastate equity crowdfunding, however, has not taken off to the extent as originally anticipated due to confusion and fear that the SEC may interpret any online campaign as a federal and not intrastate offering.
Intrastate Crowdfunding Exemptions Available Now
Alabama, District of Columbia, Georgia, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Mississippi, Oregon, Pennsylvania, Tennessee, Texas, Vermont, Washington, and Wisconsin have each adopted an intrastate crowdfunding specific prospectus exemption.
The Secretary of State of Mississippi filed an Administrative Notice on February 9, 2015 regarding its intent to adopt Proposed Rule 2.04 Invest Mississippi Crowdfunding Simplified Registration Statement by Administrative Action. Under the notice the proposed rule became effective 30 days from the date of filing or March 11, 2015.
The Idaho Department of Finance issued an order on January 20, 2012, which mirrors the intrastate crowdfunding rules adopted in other states. A blanket order has not been adopted in Idaho and an intrastate equity crowdfunding bill has not been proposed in Idaho at this time. Issuers wanting to crowdfund in Idaho would need to obtain their own order from the Idaho Department of Finance before conducting an equity crowdfunding campaign.
Michigan enacted legislation effective October 21, 2014, to create a stock exchange for securities sold or offered on a web portal pursuant to their intrastate crowdfunding exemption.
An updated PDF chart summarizing each state’s intrastate crowdfunding exemption will be added in the next week or two once I have a chance to cross-check all the information.
Intrastate Crowdfunding Exemption Bills Pending
Alaska, Arizona, California, Colorado, Florida, Hawaii, Illinois, Iowa, Kentucky, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, Nevada, New Mexico, North Carolina, South Carolina, Virginia and West Virginia are all considering intrastate crowdfunding exemption bills.
The Governor of Kentucky signed the intrastate equity crowdfunding bill on March 19, 2015. The bill becomes effective 90 days after the close of the legislative session. This spring session officially closes March 25, 2015, which means the Kentucky crowdfunding exemption is effective June 24, 2015.
The Virginia intrastate equity crowdfunding bill has been delivered to the Governor of Virginia for execution into law.
Connecticut and Rhode Island, both not on the list above, have legislation pending in their respective state, that would require the state to conduct a study and make recommendations on the legislation necessary to implement crowdfunding in their particular state.
Texas, which has adopted a crowdfunding exemption, has proposed legislation to create a stock exchange for securities sold or offered on a web portal pursuant to their intrastate crowdfunding exemption. They are also considering two proposed bills providing for further regulation of crowdfunding portals.
The chart below provides the name and status of the intrastate crowdfunding related bills that are pending as of March 19, 2015. This list may not be complete. Several states have competing intrastate crowdfunding bills pending in the house and senate, or renumber and rename the same bill depending if it is in the state house or senate.
Author: Alixe Cormick is the founder of Venture Law Corporation in Vancouver, British Columbia and a member of the Advisory Board of the National Crowdfunding Association of Canada. You can reach Alixe by phone at 604-659-9188, by email at email@example.com, on twitter @AlixeCormick or on Google+.
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 950+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit www.ncfacanada.org.