Michael V. Seitzinger
Crowdfunding refers to the financing of an activity through the collective cooperation of people who pool their money or other resources, sometimes through a networking site on the Internet. Common goals of crowdfunding involve such activities as disaster relief, political campaigns, and investing. In the investment area, crowdfunding typically involves relatively small individual monetary contributions from a group of investors in order to meet a specific goal. The use of crowdfunding in the investment area is receiving increased attention by Congress and by the Securities and Exchange Commission (SEC or Commission).
Some in Congress believe that the two major federal securities laws, the Securities Act of 1933 and the Securities Exchange Act of 1934, have registration and reporting requirements which are so onerous and costly that small companies have great difficulty raising capital. The 1933 Act sets out requirements for the registration of the offering of securities; the 1934 Act requires ongoing disclosure by companies through the filing of annual, quarterly, and other reports.
Bills have been introduced in the 112th Congress which would provide for exemptions from some of the registration requirements of the federal securities laws. These bills set a dollar limit, such as $5 million or $50 million, for capitalizations which may be exempt from registration requirements.
President Obama has indicated that he supports a crowdfunding exemption. In addition, officials at the SEC have indicated that the Commission will also likely consider some kind of crowdfunding exemption.
Date of Report: October 19, 2011
Number of Pages: 7
Order Number: R42060
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