A Year Late, S.E.C. Weighs in With 585 Pages of Crowdfunding Rules

Picture Courtesy of Wordzx

Picture Courtesy of Wordzx

By ROBB MANDELBAUM,  The day before the Securities and Exchange Commission voted last week to propose rules to implement the crowdfunding section of last year’s JOBS Act, advocates on both sides of the issue — those favoring investor protection and those eager to make it easier for companies to raise capital — appeared to fear the worst. “You’ve waited so long for the shoe to drop that you think it’s never going to,” said D.J. Paul, vice chairman of Crowdfund Intermediary Regulatory Advocates, a trade association for the new industry. “Now I’m just afraid that the shoe might drop on our head.”

But after more than a year of delay, the Securities and Exchange Commission’s preliminary crowdfunding rules won the support on Wednesday of both Republicans and Democrats on a commission long divided on partisan lines, and passed unanimously. The public has 90 days tocomment on the proposed rules. It could be at least another six months before the agency issues final rules.

And many industry backers breathed a sigh of relief. “I could not be happier with the diligence and thoughtfulness the commission staff put into it,” Mr. Paul said after starting to read — but not having finished — the 585-page regulation. “I saw some things that were good. I didn’t see anything that was deeply troubling.”

The JOBS Act was an effort to get more capital, mostly in the form of stocks and bonds, into growing companies. It established a securities crowdfunding industry modeled on the work of platforms like Kickstarter, which raises money as donations or in exchange for perks or rewards. Under the law, small companies can raise relatively small amounts of money — up to $1 million a year — through financial intermediaries from many small investors, without the expense of becoming publicly traded.

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