Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, March 8, 2012

House Passes Crowdfunding Legislation

The House passed the JOBS Act (Jumpstart Our Business Startups) by a vote of 390-23 today.  The bill would lift SEC restrictions on soliciting investors and would permit "crowdfunding" to permit entrepreneurs to raise funds from larger pools of small investors.  WPost, House passes jobs legislation

Unfortunately, as I have blogged previously, the legislation does little to protect investors who will receive pitches to invest not only from well-intended small business men, but also fraudsters always looking to prey on the gullible.  Moreover, there is no evidence that these measures will actually promote job growth.  Here is a statement from NASAA, regulators in the field who see the results of fraudulent schemes everyday:

“While well intentioned, the JOBS Act approved today by the House sacrifices essential investor protections without offering any prospects for meaningful, sustainable job growth. NASAA urges the Senate to craft legislation that balances economic growth with the protections that promote the necessary confidence investors must have in financial markets to sustain an economic climate that encourages job creation.

“State securities regulators are acutely aware of today’s difficult economic environment, and its effects on job growth. Small businesses are important to job growth and to improving the economy. However, by placing unnecessary limits on the ability of state securities regulators to protect retail investors from the risks associated with smaller, speculative investments, Congress risks enacting policies that, although intended to strengthen the economy, will likely have precisely the opposite effect.”


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