From: Executive Director, Old Takoma Business Association

In re: Crowdfunding regulations under the JOBS Act

Date: May 24, 2013

Like other advocates for small businesses around the country, the Old Takoma Business Association (OTBA) is eagerly awaiting the release of regulations on “crowdfunding” to implement the new provisions enacted by the Jumpstart Our Business Startups (JOBS) Act.  A recent survey conducted by OTBA revealed that a number of small businesses in our trade area are experiencing difficulty obtaining financing from traditional sources, and we expect that crowdfunding could help address this pressing problem.  We understand, however, that before the crowdfunding provisions can be finalized, the Securities and Exchange Commission (SEC) has to release proposed regulations, provide a comment period, review all of the comments received on the proposed regulations (which could number in the hundreds and maybe even thousands) and then issue final regulations.   And even then the wait would not be over for small businesses.  Rather, it will take additional time for funding portals to form and register with the SEC under the final regulations.  Thus, we are concerned it could be several years before our small businesses can take advantage of the crowdfunding provisions.

Many of our small businesses need capital now and cannot afford to wait for years for the flexibility in seeking financing that Congress intended to implement with the JOBS Act.  As a result, we request that the SEC allow for reliance on the proposed regulations governing crowdfunding by providing that any securities issued after the date the proposed regulations are published but before the date the final regulations are published (the “proposed regulations period”) will qualify for the exemption under section 4(a)(6) of the Securities Act of 1933 (the “Act”) if they comply with the proposed regulations and that any intermediary that meets the requirements for funding portals under these proposed regulations will be treated as a funding portal described in section 4A(a)(1)(B) of the Act and section 3(a)(80) of the Securities Exchange Act of 1934 for purposes of any offering made during the proposed regulations period.   We recommend, further, that the SEC allow portals to register with the SEC under the rules in the proposed regulations, with such registration to be effective only through the proposed regulations period.

Providing for such reliance during the proposed regulation period will provide needed financing for America’s small businesses while posing little downside risk for the SEC and investors.  Moreover, allowing crowdfunding to be implemented under the proposed regulations will allow the nation’s issuers, intermediaries, and investors to identify possible questions or problems with the proposed regulations and result in a more informed comment process and therefore better final regulations.

OTBA appreciates the opportunity to submit this comment.
Patricia Baker
Executive Director, OTBA