JOBS Act of 2012: Ten Years of Legalized Investment Crowdfunding

April 6, 2022 Entrepreneurs, Start-ups, Small Businesses, Equity Crowdfunding, Alternative Funding, FinTech and Alternative Finance, Fintech International, Fundraising, Investing, Trading, Innovation and Resources, Online Funding / Investing Campaigns, Online Funding / Investing Portals, Stories, Venture Funding and Building, Voices No comments

Crowdfund Insider | JD Alois | Apr 5, 2022

NCFA: Congrats JOBS Act and to everyone who moved the needle back then and continues to move the needle now. This was the catalyst to peer to peer platform finance, emergence of 'arm chair dragons', VC as-a-service, and to the popularity and growth of AltFi and Fintech broadly

The JOBS Act of 2012 was signed into law by President Barack Obama ten years ago today, on April 5, 2012. In a rare moment of bipartisanship, Republicans and Democrats joined together to help private firms raise much-needed growth capital via online securities offerings.

Under the new rules, Regulation Crowdfunding (Reg CF), and Regulation D 506c were created. Regulation A (Reg A+) received a key update for a securities exemption that effectively no one used prior to the JOBS Act. Firms using these exemptions were initially able to raise up to $1.07 million using Reg CF and up to $50 million under Reg + – from both accredited and non-accredited investors. Reg D 506c, approved online capital formation from accredited investors. A new financial intermediary was created as well. Funding Portals, a new type of intermediary, are FINRA regulated platforms that are legally able to issue securities under Reg CF (along with regulated broker-dealers).

See: Crowdfunding is Now a Serious Way for Private Ventures to Raise Capital

Now, becoming law did not mean these new rules were immediately actionable. It took the Securities and Exchange Commission years to complete everything. It was only in mid-2016 that the SEC approved the final rules for Reg CF.

Last year, the SEC improved securities crowdfunding rules by raising the Reg CF funding cap from an anemic $1.07 million to $5 million – far more in line with seed rounds. Reg A+ got some attention too as issuers are now able to raise up to $75 million in a min-IPO type offering. There were other improvements too.

Today, securities crowdfunding platforms have raised over a billion dollars – creating new jobs and allowing younger firms – frequently outside established tech hubs – to raise growth capital.

Around the beginning of 2022, CI connected with Sherwood “Woodie” Neiss, Principal at Crowdfund Capital Advisors and a key proponent in the creation of the JOBS Act who was there when the bill was signed into law, said the industry is at a tipping point as investors backed startups at a record pace during 2021. Neiss said that the online capital formation sector is “accelerating as we’ve never seen” before.

Sep 2013: Why is September 24th a Huge Day for Entrepreneurs? Title II of the US JOBS Act and Crowdfunding for Accredited Investors Begins

We reached out to Neiss earlier today for his thoughts on the ten year anniversary of the JOBS Act, he shared:

“It is hard to believe that ten years ago today, we were sitting in the Rose Garden as President Obama signed Regulation Crowdfunding and the JOBS Act into law. Tearfully, I sat there as he called the work that we did walking the halls of Congress, lobbying, testifying, and negotiating the final framework for Investment Crowdfunding a “gamechanger.” Today, like a proud parent, I look over the industry data, and I see how thousands of innovative pre-IPO startups and small businesses all across the United States have been able to turn to a new pool of investors … the American people.”

See: US Investment Crowdfunding Exemptions Explained

“I’m humbled that it has already become a billion-dollar industry; how we delivered on what we promised: a balanced way for entrepreneurs to raise necessary money from willing investors while providing investors with the disclosures the regulators wanted them to see and guardrails to mitigate losses; and how it will forever change the way companies are funded going forward,” he added. “At the same time, I realize there is still much to do, and our work is not done. We will continue to be a champion for the industry, collaborate with the regulators and help scale our nation’s entrepreneurs so anyone with a great idea and a passionate group of investors can perhaps become the next unicorn!”

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NCFA Jan 2018 resize - JOBS Act of 2012: Ten Years of Legalized Investment Crowdfunding The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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