Changing Crowdfunding Rules and Regulations (H.R. 4564)

What is H.R. 4564?

(Updated July 19, 2017)

This bill deals with crowdfunding—the practice of funding a project or venture by raising many small amounts of money from a large number of people, often via the Internet. The bill would increase the cap on crowdfunding dollar amounts from $1 million to $5 million. The bill also eliminates a number of reporting requirements relating to crowdfunding. One of these deals with “funding portals”: crowdfunding intermediaries that are not brokers (meaning they don’t sell securities, offer investment advice, or compensate employees). The bill would still require these portals to register with the SEC, but not with the Financial Industry Regulatory Authority (FINRA). Additionally, the bill would allow issuers of securities to self-certify financial statements for capital raises under $500,000, use independently-reviewed (that is, non-SEC) financial statements for capital raises between $500,000 and $3 million, and provide audited financial statements for raises above $3 million. 

Argument in favor

It’s too difficult for small businesses and entrepreneurs to finance startup or growth.

Argument opposed

Weakens investor protections and market integrity through too much deregulation.

Impact

The bill impacts issuers seeking to crowdfund, and the regulations such issuers must deal with, depending on dollar thresholds.

Cost of H.R. 4564

A CBO cost is currently unavailable.

Additional Info

(Photo Credit: Tech Cocktail)