According to a note from Small Business California (SB Cal), the group that advocates on behalf of SMEs, SB Cal will be sponsoring legislation to improve access to capital via securities crowdfunding.
This is not the first time that California has attempted to craft crowdfunding legislation and get it signed into law. The legislature has attempted numerous times to create an intrastate crowdfunding law.
As for the rest of the US, there are many states that have created rules for local companies to raise capital online. Some of these rules are better than the Federal law, created by the JOBS Act, and others, not so much. In regards to impact, most intrastate crowdfunding laws have fallen short in driving the type of access to capital that has been hoped for. California could be different due to the fact it possesses one of the strongest innovation-driven economies in the world. In fact, California could be considered its own country as it tops many other developed nations in economic might and population. The question is whether or not they can get the rulemaking right.
SB Cal states:
“We are reviewing ways to fill the gaps left by the JOBS Act, now that the federal law has been in operation for several years. It appears that equity crowdfunding has not been utilized by small and start-up businesses because of the costs involved, including the requirement that financial statements be reviewed which can also be very costly. SB Cal’s Board Member, Mark Hiraide is an expert in securities laws for small businesses and will be drafting legislation to be introduced in January.”
Hiraide will need to create an exemption that is not capped to an unrealistic degree while keeping costs for issuers to a minimum. It would also be nice to see a serious tax emption, to mitigate investor risk, that would boost entrepreneurial innovation. Let’s see what percolates up in January.