The Jobs Act was enacted to promote efficient access to external capital by small businesses. Title III of the Jobs Act offers small businesses the chance of efficient financial intermediation through crowdfunding. The crowdfunding exemption is not self-executing but, instead, requires regulatory implementation by the SEC.

The Commission’s first iteration of its crowdfunding rules fails to offer small businesses efficient access to external capital. Principally, this is because the proposed crowdfunding rules: (1) require excessive disclosures, especially regarding smaller crowdfunding offerings; (2) fail to offer small businesses relying on the crowdfunding exemption two-way safe harbor integration protection; and (3) fail to protect small businesses from the loss of the crowdfunding exemption as the result of the financial intermediary’s failure to meet its statutory and regulatory obligations.

The problems can be fixed by the Commission by revising its proposed crowdfunding regulations, thereby fulfilling its broad and ubiquitous obligation to balance capital formation and investor protection.

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Notes/Citation Information

Letter from Rutheford B Campbell, Jr., Professor, to Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange Commission (February 14, 2014) (submitted electronically to rule-comments@sec.gov).