CFIRA and CfPA Issue Joint Statement Regarding Lawsuit Against the SEC to Block Implementation of Regulation A+, Title IV of the JOBS Act
In a joint statement released today by the leadership of crowdfunding industry associations Crowdfunding Intermediary Regulatory Advocates (CFIRA) and the Crowdfunding Professional Association (CfPA), combined forces to strongly denounce a lawsuit filed in the US Court of Appeals (Galvin v. SEC, DC Case No. 15-1150) by the state of Massachusetts last week. The lawsuit was filed in a attempt to invalidate recently promulgated rules regarding Regulation A+ or Title IV of the JOBS Act.
The JOBS Act was enacted into law by Congress with overwhelming bi-partisan support in 2012. Title IV was implemented by the SEC on March 25, 2015, when the Commission unanimously voted to approve the final rules, scheduled to go into effect on June 19, 2015. The SEC’s final rulemaking followed months of extensive commentary by the public and tireless hours by the SEC Staff.
The joint statement declared:
“We stand arm in arm in support of the U.S. Securities and Exchange Commission in support of the final Regulation A+ rules. As Chair White aptly noted in her remarks on March 25, 2015, presenting the final rules for a Commission vote:
“Small companies are essential to the livelihood of millions of Americans, fueling economic growth and creating jobs. It is critically important for the Commission to consider ways that our rules can facilitate capital-raising by smaller companies. Congress recognized the importance of providing new avenues for capital-raising when it adopted the JOBS Act, which provides for crowdfunding as well [as] Regulation A+.”
At issue in the court is the authority of the 50 states to review small public offerings which are reviewed by the SEC Staff, a burden which history has shown that small and emerging businesses can least afford – an issue which the Commission carefully and thoughtfully considered throughout the rulemaking process.
“There is a useful role for NASAA and state regulators to play in policing the securities industry and protecting investors from unscrupulous actors. However, hiring armies of lobbyists and lawyers to protect their fiefdoms at taxpayer expense – and at the expense of innovation, job creation and the future of our youth and the U.S. economy – is not one of them. And where is the logic to a state official, whose salary would not qualify him to be an accredited investor under U.S. law, superimposing his judgment over that of the SEC and the residents of his state? No, Secretary Galvin, to borrow a phrase from Charles Dickens’ Oliver Twist: the law is not an ass.”
According to the industry leaders the careful deliberation and judgment by the Commission and the Staff are fully supported by the Commerce Clause of the U.S. Constitution, giving Congress and the Federal government the unfettered power to regulate interstate commerce, and the express mandate of the JOBS Act empowering the SEC with both the responsibility and the obligation to fully and finally decide this matter – backed by 30 pages of painstaking analysis by the Commission reflected in the Final Rules (SEC Release No. 33-9741, at pp. 205-234).
CFIRA / CfPA also note that the SEC’s Advisory Committee on Small and Emerging Companies, a blue ribbon committee which includes as one of its members D.J. Paul, Co-Chair of CFIRA, recently unanimously recommended to the Commission to remove the power of the states to review SEC-vetted Regulation A+ offerings.
The industry leadership explained that the untimely litigation by the Chief Securities Regulator of the Commonwealth of Massachusetts, if allowed to stand unchecked, will have the intended effect of placing a dark cloud over hundreds, if not thousands, of Regulation A+ IPOs while this matter winds its way through the courts, effectively delaying or denying SME’s access to tens or hundreds of millions of dollars of capital, and the many jobs that are certain to be created with this capital.
CFIRA and CfPA called upon the population of Massachusetts to stand up for small companies and job creation;
“We call on the people of the Commonwealth of Massachusetts to petition their elected representatives, including Secretary of State William Galvin, to withdraw the lawsuit from the federal docket and channel the state’s tax dollars to more productive endeavors. We remind them that it was their Secretary of State 35 years ago who blocked the sale of shares of Apple Computer to retail investors in its IPO, deeming them “overvalued” and too risky for the ordinary investor. This proved to be a costly error in judgment for the residents of Massachusetts.”
“We call on our members of Congress to speak, once again, with a strong and united voice to aid in implementing Title IV, Regulation A+ with due dispatch.”
“Our country’s economic future, and the future of our young job creators, demands nothing less.”
(Editors Note: Sam Guzik is a Senior Contributor to Crowdfund Insider)