California, the most populous state in the country, is attempting to legalized equity crowdfunding once again. Last year the Assembly gave it a valiant effort but the bill died ignominiously in Appropriations committee. The execution was said to be delivered by the AARP, a group that sees crowdfunding as a potential way to defraud senior citizens.
This time there are actually two bills enduring the law making process; AB722, similar to the bill that died last year, and the Local Securities Exemption Act.
Small Business California spent hundreds of hours advocating on behalf of last years bill and they are pushing its reincarnation once again. Sponsored by Assemblyman Henry Perea, (D-Fresno), it appears California may have a better shot at it in 2015.
Scott Hauge, President of Small Business California, recently quoted in SFGate, stated;
“Any funding proposal under our bill would have to be reviewed by the California Department of Consumer Oversight,” said Hauge. “We think that will address protections for consumers.”
California has an economy larger than most countries so facilitating capital for SME’s could a powerful economic boost. The challenges are in the details of any legislation that actually will become law. Some states have legalized equity crowdfunding and closely aligned their rules with the proposed federal exemption for retail crowdfunding or Title III of the JOBS Act. This portion of the JOBS Act is largely viewed as dead on arrival; too restrictive, too costly and too limiting in amounts that can be raised. But California’s effort is indicative of the frustration that workable final rules have not been released. The recent final rules on Reg A+ may provide some relief but funding at the lower end still can be a challenge.
The article in SFGate references a young-restauranteur in San Francisco. Apparently he has a “bustling” success with 33 employees that wants to grow. American Grilled Cheese Kitchen would like to expand its business but views VCs that seek dramatic growth as not being interested in his small operation that is very low tech. Equity crowdfunding may provide the answer to his needs someday.
AB722 as introduced
[scribd id=260634702 key=key-T0ETYQDaBpHEaWwMGXrL mode=scroll]