The Association of Online Investment Platforms (AOIP) has sent a letter to Congress asking policymakers to move forward legislation that aims to support access to capital for smaller firms and entrepreneurs.
The AOIP was created to advocate on behalf of online capital formation for private firms as well as fostering opportunities for smaller investors. Member platforms leverage private securities exemptions to help firms raise the capital needed, which in turn drives economic growth. The letter notes that recently, the US Chamber of Commerce reported that small businesses are the creators of almost two-thirds of all new jobs. Yet at the same time, access to capital has declined.
The letter also references a recent statement by the SEC Small Business Capital Formation Advisory Committee that stated:
“… we need to promote the growth of diverse entrepreneurial ecosystems, by providing pathways that make it easier for investors to find and finance small- business investment opportunities. Otherwise, too many small companies will be at risk of “dying on the vine” – and with them their innovation, job creation, and economic opportunities that fuels our country’s global economic dominance.”
The letter outlines a series of bills that are currently being considered in Congress, which have been introduced by the House Financial Services Committee.
The President of the AOIP, Maxwell Rich, commented on the need to move quickly and support smaller firms:
“Now, more than ever, Congress must take due consideration to JOBS Act 4.0 and push it forward. A decade post JOBS Act of 2012, many of its promises for small businesses and mainstream investors are in sight and the risks and concerns of this novel legislation, originally voiced by its detractors, are unrealized. Small and emerging businesses are in need of routes to capital beyond what is currently authorized by law; venture capital funding to new and emerging companies is down over 50% and interest rates are at historic highs. Congress has the power to help, and the AOIP strongly supports the bills enumerated in its most recent letter and its members are available to the legislative, executive and third-parties who may need counseling on their potential benefits to the American economy and investors of all walks of life.”
Doug Ellenoff, Managing Partner of the law firm of Ellenoff, Grossman, and Schole, who is a founding advisor to the AOIP, said that for the last ten years, various constituencies in the crowdfunding ecosystem, including the owner-operators of online investment platforms, have brought to life the vision of responsible capital formation for entrepreneurs, raising capital for innovation and creating jobs- thousands of them.
“It’s timely to reflect on how to accelerate the growth in this industry and eliminate unnecessary friction and facilitate even market acceptance and adoption of the JOBS Act provisions.”
The AOIP worries that capital formation has taken a back seat at the SEC under the current leadership. At the same time, the AOIP voices support for Impact Investing while cautioning against the rulemaking intent of the Commission regarding climate disclosure that will harm smaller firms, adding cost for both public and private entities.
“While the Jumpstart Our Business Startups Act 2012 has made instrumental changes to the nature of capital raising and supporting businesses – it is time to make updates from our learnings,” stated Rebecca Kacaba, CEO of DealMaker and an AOIP Board Member. “One of the key downfalls we are seeing in past legislation is the rigidity of the “accredited investor” definition – which hinders the democratization of wealth. Today’s investors are extremely knowledgeable. We must recognize this in our legislation and provide them equal opportunity for early-stage investment.”
The letter from the AOIP, addressed to Representative Patrick McHenry, Chairman of the House Financial Services Committee, is available below.