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January 31, 2013

Senator Franken Voices Concern to SEC over Delay in Finalizing JOBS Act Crowdfunding Regulations

By Jim Hamilton, J.D., LL.M.

In a letter to SEC Chairman Elisse Walter, Senator Al Franken (D-Minn) urged the SEC to adopt final regulations implementing the crowdfunding provisions of the JumpStart Our Business Startups (JOBS) Act. The senator specifically mentioned the interest of the emerging technology community in the final regulations. Senator Franken attached a letter he received from a constituent as an illustrative example of the concerns that have been raised regarding the finalization of regulations implementing the JOBS Act, and specifically the crowdfunding provisions. The senator asked the Commission to give due consideration to these concerns.

Authored by Senator Jeff Merkley (D-Ore), Title III of the JOBS Act adds a new crowdfunding exemption from the Securities Act allowing companies to accept and pool, over the Internet, individual investments to support an entrepreneurial effort.

The JOBS Act directs the SEC to issue regulations to carry out the crowdfunding provisions within 270 days of enactment. The JOBS Act was signed by the President on April 5, 2012. The SEC has not yet proposed regulations implementing the crowdfunding provisions of the Act. The Franken-referenced letter notes that the delay in adopting final regulations implementing Title III has created uncertainty over access to capital among small emerging businesses.

In a March 13, 2012,letter to the Senate Banking Committee, then–SEC Chairman Mary Schapiro said that the JOBS Act requires a series of new, significant SEC rulemakings with time limits that are not achievable. She noted that the rulemaking for the crowdfunding section had a deadline of 180 days and said that time frame was too short to develop proposed rules, perform the required analysis, solicit, review and analyze public comments, and adopt final rules. The chairman said that a deadline of 18 months is more appropriate for rules of this magnitude. The enacted version of the JOBS Act raised the time limit from 180 days to 270 days, still below the 18 months suggested by Chairman Schapiro.

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