Crowdfunding: When Will the Rules Be Done?

Crowdfunding RulesThe startup community is getting excited and antsy.  The comment period on the SEC’s crowdfunding rules ended February 3.  The speculation has begun – when will the rules be final?  Could it be this summer?

My answer:  Who knows!

But to help us make some guesses, I have put together the below table.  The way I see it, we have two recent rule making projects from the SEC that provide us some guidance:  the bad actor rules and the rules repealing the ban on general solicitation.  Based on how long it took the SEC to issue the final rules in these two recent instances, I don’t think we are going to see final crowdfunding rules until late this year.  My guess: December 2014 or even early next year.

Crowdfunding Timeline Chart

(1) In the proposed rules, the SEC said that it was issuing them in light of comments received “and the magnitude of the change that the elimination of the prohibition against general solicitation represents to the Rule 506 market.”

Of course, I hope I am wrong and we see the final rules sooner.

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About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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  • http://www.venturestab.com/ Jerome Gentolia

    Oh…the bureaucracy of big government! I held my breath and died a million times! LOL! I am assuming they will stall this until close to the next election, and then will be forgotten again afterwards. Oh well!

    It seems like most of these legislators have no idea how to handle it too. I mean in spite of all the streamlining, they still come up short.

    • http://startuplawblog.com/joewallin Joe Wallin

      It can be painful.

  • http://www.myercorplaw.com/ John A. Myer

    Excellent work, Joe. It is one thing for Congress to draft shoddy legislation and quite another for the SEC to come up with rules that dovetail the new laws into the subtle and complex fabric of securities markets and practices. This takes a lot of work and a lot of time. And they can’t always punt as they did on AI verification.

    • http://startuplawblog.com/joewallin Joe Wallin

      I agree. It is easy to blame people, but the truth is, it is a hard job. Having said that–I don’t think the SEC should have even issued any proposed rules on Reg D/Form D. The Congress only chose 1 condition to general solicitation–and I don’t think the SEC, based on “comments received”–should have decided to re-legislate the JOBS Act.

      • http://www.myercorplaw.com/ John A. Myer

        As a matter of constitutional law, you are absolutely right. But the SEC is also trying to make sense out of the laws, and the two goals may not be compatible. The JOBS Act created an exemption from registration for public offerings as longs as the subscribers were accredited. The cornerstone of the 33 Act is however registration of public offerings. Instead of an exemption, Congress should have created a one-page registration statement, or something along those lines. A fully compliant exempt public offering is an oxymoron under the 33 Act. There are so many contradictions under the securities laws (eg, is stock issued to a founder even a security?), do we really need another conundrum?

        • http://startuplawblog.com/joewallin Joe Wallin

          Yeah…my thinking is this…whenever possible our statutes should be short, and not require regulations in order to allow their use.

          • http://www.myercorplaw.com/ John A. Myer

            Indeed.

  • lunarmobiscuit

    I personally stopped holding my breath today, and posted a campaign on an accredited-only, equity-based, non-solicited crowdfunding site. Given that, I legally can’t say where, lest some sophisticated, HNW investor who I’ve not yet met might find it.

    It’s bad enough that the SEC takes two years to protect the populace from losing $1,000. Why they think the accredited also need so much protection from fraud is beyond my comprehension.

    All this while my neighboring reservation, six miles from my house now provides free college tuition, room, and board to their whole tribe, courtesy of the gamblers of Seattle who are legally allowed to gamble as much as they’d like, without nary a W-2, 1099, or 1040 required for admission.

    • http://startuplawblog.com/joewallin Joe Wallin

      Great comments Luni.