Law Commons^™

The Risk Of Money Laundering Through Crowdfunding: A Funding Portal's Guide To Compliance And Crime Fighting, Zachary Robock

Michigan Business & Entrepreneurial Law Review

With the recent passage of the Jumpstart Our Business Startups Act (“JOBS Act”) and proposed regulations, equity crowdfunding is poised to play an important role in fundraising for many types of emerging growth companies. A fundamental purpose of crowdfunding is to reduce economic barriers to capital markets for emerging growth companies, in part by relaxing rigorous information disclosure requirements currently mandated by the Securities and Exchange Commission (“SEC”). Relaxed regulation should help reduce the cost of fundraising, but it will also present certain risks. Investor fraud is a common concern, which is addressed at length in the JOBS Act and …

Advising Venture & Early-Stage Clients: Current Ear-To-The-Ground Assessment, Gary D. Leclair

William & Mary Annual Tax Conference

No abstract provided.

Investor And Market Protection In The Crowdfunding Era: Disclosing To And For The 'Crowd', Joan Macleod Heminway

Scholarly Works

This article focuses on disclosure regulation in a specific context: securities crowdfunding (also known as crowdfund investing or investment crowdfunding). The intended primary audience for disclosures made in the crowdfund investing setting is the “crowd,” an ill-defined group of potential and actual investors in securities offered and sold through crowdfunding. Securities crowdfunding, for purposes of this article, refers to an offering of securities made over the Internet to a broad-based, unstructured group of investors who are not qualified by geography, financial wherewithal, access to information, investment experience or acumen, or any other criterion.

To assess disclosure to and for the …

Proposed Crowdfunding Regulations Under The Jobs Act: Please, Sec, Revise Your Proposed Regulations In Order To Promote Small Business Capital Formation, Rutheford B. Campbell Jr.

Law Faculty Advocacy

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 …

Social Innovation, Peter Lee

Peter Lee

This Article provides the first legal examination of the immensely valuable but underappreciated phenomenon of social innovation. Innovations such as cognitive behavioral therapy, microfinance, and strategies to reduce hospital-based infections greatly enhance social welfare yet operate completely outside of the patent system, the primary legal mechanism for promoting innovation. This Article draws on empirical evidence to elucidate this significant kind of innovation and explore its divergence from the classic model of technological innovation championed by the patent system. In so doing, it illustrates how patent law exhibits a rather crabbed, particularistic conception of innovation. Among other characteristics, innovation in the …

From Revolutionary To Palace Guard: The Role And Requirements Of Intermediaries Under Proposed Regulation Crowdfunding, Andrew D. Stephenson, Brian R. Knight, Matthew Bahleda

Michigan Business & Entrepreneurial Law Review

Intermediaries in securities crowdfunding face significant requirements as a result of the statutory mandates of Title III of the JOBS Act. The SEC, in its proposed rules, provided structure to these requirements. The proposed rules would create strict requirements for intermediaries regarding their relationships with investors and how they undertake crowdfunding transactions under Section 4(a)(6) of the Securities Act. The proposed rules would also create and establish the guidelines for funding portals, a new type of limited purpose securities broker. While some commentators decry the SEC for placing undue burdens and legal liabilities on intermediaries in securities crowdfunding, the SEC …

Crowdfunding And Sport: How Soon Until The Fans Own The Franchise?, Edward A. Fallone

Marquette Sports Law Review

No abstract provided.

Sec Preventative Measures Against Securities Violations And Fraud Post-Jobs Act, Kristie Benner

Kristie Benner

The purpose of the Securities Act and the Exchange Act is to supply investors with the necessary information to make informed decisions regarding an entity’s offerings. After the 2010 financial crisis, the economic crisis devastated the economy leaving many without jobs. In response to this economic recession, President Obama signed the Jumpstart Our Business Startups Act (JOBS Act) into law in 2012 as one method of stimulating the economy. This Act deregulated the securities laws for small businesses in the hopes of creating jobs and invigorating the economy. These changes allow a small business more access to capital by reducing …

Power To The People: How The Sec Can Empower The Crowd, R. Kevin Saunders, Ii

Vanderbilt Journal of Entertainment & Technology Law

Crowdfunding emerged as a heralded capital-formation mechanism at a time when capital markets desperately need it, but is it actually viable? Following passage of the JOBS Act and issuance of proposed rules by the SEC, equity crowdfunding will soon become reality. When signing the JOBS Act, President Obama touted it as a means "to increase American job creation and economic growth," but that will only hold true for Title III, Crowdfunding, if the SEC creates an attractive market for high-quality projects. The SEC's proposed rules impose a heavy disclosure burden relative to a low maximum offering amount, offering a poor …

Teenage Crowdfunding, Andrew A. Schwartz

Publications

Teenage startups are in the public interest and should be encouraged, yet the federal CARD Act of 2009 eliminated credit card financing for many such companies, cutting off an important source of early-stage business capital for teenage entrepreneurs. Since then, however, Congress passed the CROWDFUND Act of 2012 which will allow teenagers to raise early-stage financing through Internet crowdfunding. Teens, being masters of the Internet, are well positioned to exploit this new opportunity, with the upshot being that securities crowdfunding may become an important way for youthful entrepreneurs to fund their business dreams.

Crowdfunding's Impact On Start-Up Ip Strategy, Sean M. O'Connor

Articles

This Paper proceeds in Part I by reviewing the crowdfunding landscape and its potential benefits for start-ups, especially with regard to IP strategies. Part II examines the provisions of the JOBS Act and argues that the disclosure requirements of the CROWDFUND Act title will make the latter less attractive than other start-up financing options and may negatively affect start-ups’ IP strategies, in part by risking the disclosure of enabling aspects of patentable inventions.

Part III explores issues arising from the widespread involvement of many potentially unsophisticated investors who have no connection to the start-up. This contrasts with current unsophisticated investors …

The New Regulation Of Small Business Capital Formation: The Impact—If Any—Of The Jobs Act, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

The Jumpstart Our Business Startups Act (JOBS Act) was—at least apparently—driven by the desire to promote job creation by facilitating small business capital formation. The legislation was premised on the correct assumptions that small businesses create jobs and that an efficient access to capital is essential for small businesses to emerge, compete, and survive in our competitive, market economy. It is certain that the JOBS Act will have an effect on businesses’ access to external capital. With regard, however, to the capital formation efforts of small businesses—businesses that may account for more than 25% of our national economy—the analysis offered …

Solving Charity Failures, Brian L. Frye

Law Faculty Scholarly Articles

“Crowdfunding” is a way of using the Internet to raise money by asking the public to contribute to a project. In the past, asking a large number of people to contribute small amounts of money to a project was expensive and inefficient for most organizations and individuals. By greatly reducing transaction costs, crowdfunding enables anyone to inexpensively and efficiently seek small contributions to a project. While crowdfunding is a new model of fundraising, it has already transformed funding for the arts. For example, the crowdfunding platform Kickstarter distributed more than forty million dollars to the creators of almost seventy-five hundred …

Business Lawyering In The Crowdfunding Era, Joan Macleod Heminway

Scholarly Works

Crowdfunding is all the rage in conversations about small business finance. Yet, as with many other rapidly developing business innovations, practicing lawyers were, perhaps, secondary players in the development of business models for crowdfunding. The advent of crowdfunding (and crowdfund investing, in particular) has exposed fault lines in business lawyering. This short Article defines the crowdfunding era, highlights a few examples of observed lawyering lapses, and, in concluding, offers a brief, preliminary assessment of possible sources of these dislocations and best practices. The conclusion also expresses a related cautionary note about the need for lawyers to redouble their efforts at …

Wisdom Of The Intermediary Crowd: What The Proposed Rules Mean For Ambitious Crowdfunding Intermediaries, Gregory D. Deschler

Saint Louis University Law Journal

No abstract provided.

How Congress Killed Investment Crowdfunding: A Tale Of Political Pressure, Hasty Decisions, And Inexpert Judgments That Begs For A Happy Ending, Joan Macleod Heminway

Scholarly Works

In April 2012, President Obama signed into law the Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act (the “CROWDFUND Act”) as Title III of the Jumpstart Our Business Startups Act. The U.S. Securities and Exchange Commission (“SEC”) was compelled to promulgate enabling regulation to effectuate the CROWDFUND Act. That rulemaking has been slow in coming.

During this period of delay, commentators have routinely denounced the postponement and expressed fear that the SEC’s rulemaking would unduly limit investment crowdfunding. This Article demonstrates, however, that it is principally the U.S. Congress that has limited the capacity of the CROWDFUND Act …