July 22, 2014
I agree with other commenters who have suggested that the proposed regulation for Title III of the JOBS Act should state that the $1 million aggregate limit pertains only to offerings under Section 4(a)(6) and does not include all exempt offerings. I also agree that clarification is needed that the limitations and requirements of the offering exemption under Section 4(a)(6) would not affect other methods of raising capital that do not involve the sale of securities, such as contributions from friends and family, donation crowdfunding, gifts, grants or loans.
The $1M cap should be net of any fees levied by the funding portals, because otherwise the $1M is a false ceiling as no business would actually be able to raise the full $1M if needed due to the portals likely charging between 3-10% of money raised as a fee.
Offerings that begin under 4(a)(6) should be able to convert to a Reg D Rule 506(c) offering as the money raised by non-accredited and accredited investors under a 4(a)(6) offering tend to act as a "first dollar" to encourage more substantial investments in the business.
I do believe that there should additional exemptions granted for investments of under $500, as many people who currently donate at that level for Kickstarter or other campaigns would certainly be interested in getting a return on their contribution if allowed. However, with a current cap of 500 non-accredited investors in a 4(a)(6), this quickly limits the ability to take on investors at this smaller level. Since the current proposed rules allow the issuer to set the floor of what would be the minimum investment, I think the cap of 500 non-accredited investors should be raised to 5,000. Any company that is willing to take on the burden of dealing with 5,000 non-accredited investors for what is considered to be a "small" total offer should be allowed to.