Daines Discusses Crowdfunding for Startups with SEC Chairman
U.S. SENATE — U.S. Senator Steve Daines today reintroduced legislation to better the way entrepreneurs raise funds through crowdfunding by repealing regulatory red tape that keeps startups from getting off the ground.
Yesterday, Daines met with Jay Clayton, the newly confirmed Chairman of the Securities and Exchange Commission (SEC) regarding his bill. During the meeting, Daines handed him a letter outlining his priorities writing, “I encourage you to review the Crowdfunding Rule for opportunities to encourage entrepreneurship and job creation.”
The SEC issued a rule in October 2015 to give entrepreneurs an important tool in their belt to make their dreams a reality. Unfortunately, however, the rules still include burdensome costs that act as a barrier to entry for many startups that want to bring jobs to their communities.
“Startups shouldn’t be penalized with costly paperwork for growing too fast,” Daines stated. “There is a better way to encourage business growth and job creation in Montana. This bill is a win for Montana and all our entrepreneurs who need capital to pursue their businesses.”
Crowdfunding Enhancement Act:
- Allows for a startup to crowdfund through a combined interest entity. When a startup is ready to grow beyond the use of crowdfunding, this entity keeps institutional investors who may want to buy the startup from being scared off. Instead of seeing potentially thousands of private individual investors all with different ownership allocations, a combined interest entity allows the institutional investors to only see the ownership interest of the combined interest entity.
- Increases the limits that require a startup to register with the SEC. Under current law, when a startup raises $1 million and grows so quickly that they also surpass the current limitation threshold, they are required to register with the SEC. The Crowdfunding Enhancement Act delays SEC filing requirements until shareholder value reaches $75 million.
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