McHenry asked Hillel-Tuch how the “power of the crowd” will prevent crowdfunding fraud. He also asked that Congress raise the crowdfunding exemption to $5 million to “allow more small businesses who need capital to utilize the cost-effective crowdfunding method.” In closing, Hillel-Tuch dismissed concerns that crowdfunding will lead to fraud, touting the transparency inherent to the process. Second, he said the SEC should preserve the current crowdfunding platform fee structure that only seeks payment for successful projects. First, Hillel-Tuch believes that the $500,000 fundraising threshold for requiring audited financial statements should be raised to $1 million because the statements impose a “significant” cost on the entrepreneur. Despite his support for the legislation, he identified three areas that he hoped the SEC would address as they implement the legislation’s crowdfunding provisions. In his opening statement, Alon Hillel-Tuch, CEO of RocketHub, praised Title III of the JOBS Act for permitting crowdfunding entrepreneurs to sell stock to their supporters. In closing, Coffee said the implementation of JOBS Act’s rules is likely to be “halting, slow, and punctuated by judicial reversals from time to time.” He also warned members that entrepreneurs may still seek private placement over crowdfunding due to the amount of required disclosures, funding portal registration requirements, and restrictions on compensation and ownership. He said retail investor distrust of the IPO process could worsen with an increase in issuers that are allowed to lawfully engage in selective disclosure under the JOBS Act. In his opening statement, John Coffee, Jr., Professor of Law at Columbia University Law School, explained how the recent loss of investor confidence could affect the implementation of the JOBS Act. In closing, Bradford also said the crowdfunding exemption must be simplified so that small business entrepreneurs can understand it “without hiring an expensive attorney.” Steven Bradford, Professor of Law, University of Nebraska, praised the crowdfunding provisions in the JOBS Act as an “important first step” in bridging the “small business capital gap.” However, he warned that unless the SEC eases the regulatory burdens of the crowdfunding exemption, small business will be unable to take advantage of its opportunities. ![]() ![]() In closing, Cartwright noted that the ultimate success of the legislation depends on the SEC’s rulemakings, and expressed concern about the SEC’s delay in issuing the guidelines set forth by Titles II, III, IV, and VII. He highlighted recent data that showed the number of publicly traded companies has declined “dramatically” because of a steady decline in initial public offerings (IPOs), and said the JOBS Act could stop this trend. In his opening statement, Brian Cartwright, Scholar-in-Residence at the University of Southern California, praised Congress for its quick, bipartisan approval of the JOBS Act despite vocal opposition from the Securities and Exchange Commission (SEC). AT THIS AFTERNOON’S OVERSIGHT AND GOVERNMENT REFORM COMMITTEE HEARING, members discussed the crowdfunding provisions of the Jumpstart Our Business Startups (JOBS) Act with industry experts, specifically discussing the potential for fraud and exploring ways to stop bad actors.
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