Kentucky’s Legislative Research Commission recently released their annual Topics Before The Kentucky General Assembly. It’s a guide to issues that may come before the legislature in the upcoming session.
One issue of interest “Crowdfunding,” which is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet.
Here is what Rhonda Franklin of the LRC had to offer on the topic:
Crowdfunding is a private investment mechanism for start-up or expansion costs of a smallbusiness. The investment would be obtained
• in small dollar amounts;
• from large numbers of people;
• mainly through the Internet; and
• with regulation by the state entity that oversees securities within the state, such as the
Kentucky Department of Financial Institutions.
Congress authorized crowdfunding in 2012 by the Jumpstart Our Business Startups (JOBS) Act. This legislation established an exemption to the Securities and Exchange Act of 1933, which required all businesses, including start-ups, to register with the Securities and
Exchange Commission (SEC) and sell stock only to accredited investors who meet net worth requirements. The exemption is intended to aid small businesses while protecting less sophisticated investors. The JOBS Act authorizes intrastate crowdfunding if a state enacts
legislation and interstate crowdfunding subject to federal regulation.
• The SEC would oversee interstate crowdfunding.
• State regulators would oversee the implementation of state legislation authorizing intrastate crowdfunding.
• Interstate crowdfunding
• The JOBS Act authorized the SEC to promulgate regulations for implementation of
interstate crowdfunding but no regulations have been adopted.
• Many states see the potential for interstate crowdfunding to increase the number of small
businesses with resulting economic growth under the JOBS Act. Almost half of the states
have enacted or are considering legislation to allow interstate crowdfunding. For
example, Indiana allows maximum investments of $5,000 per investor, not to exceed
$1 million per company if not audited by the state.•
• State legislation should require at least
• registration and incorporation documents;
• names of directors, officers, and stockholders;
• description of the business;
• prior-year tax returns;
• financial statements;
• intended use of the proceeds, target amount, and deadline;
• share price;
• description of the ownership;
• outstanding securities of the company;
• annual audits of SEC on JOBS Act financial statements for investments in excess of $500,000; and
requirements for investment portals such as registration fees or portal examinations
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