DealMaker CEO and co-founder Rebecca Kacaba participated in a Congressional hearing today. Hosted by the Subcommittee on Capital Markets, part of the House Financial Services Committee, the topic was improving access to capital and more significant investor opportunities.
DealMaker is a tech-enabled broker-dealer that enables firms to raise money online. The platform allows issuers to raise money under the full stack of securities crowdfunding, including Reg CF, Reg A, and Reg D.
In prepared testimony, Kacaba listed a series of policy recommendations to improve online capital formation. Her list of suggestions is below:
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Remove the Offering Caps that Inhibit Growth and Interfere with Job Creation
- No funding cap on Reg A
- Increase the funding cap on Reg CF to $10 million from the current $5 million limitation.
- Harmonize Reg CF and Reg A regimes
- Harmonize Rule 12(g) for Companies who Raise from Retail Investors. At $25 million in assets, a Reg CF issuer may have to register with the SEC. A Tier 2 Reg A issuer is exempt from registering as long as it is current in its reporting requirements
- Remove the Requirement for FINRA Participating Members to Comply with Corporate Financing Rule 5110 in Regulation A Offerings. Compliance with Rule 5110 imposes an undue administrative burden on broker-dealers supporting Regulation A offerings, which are generally smaller in scale than traditional public offerings.
- Expand the Availability of Regulation CF and Regulation A to More Participants
- Remove the “Common Control” Element of Regulation CF Companies Eligibility. Venture capital investors, who often hold substantial ownership stakes or board positions, encounter limitations in utilizing crowdfunding. This, in turn, reduces the maturity of investment opportunities accessible to retail investors through online investment platforms.
- Pass the Unlocking Capital for Small Businesses Act and Expand the Finders Rules to Regulation A and Regulation CF. Finders (individuals who matchmaker money with firms in need of funding) should be exempt from broker registration.
- Modernize Marketing and Advertising Rules to Grow the Space and Create More Jobs. Approve the HALOS Act for pitches to investors, reduce existing ambiguity in promotion rules.
- Increase Investor Participation to Grow Early Stage Investment Activity and Create Jobs via Tax Incentives. Establish a regime similar to the UK Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) programs that provide significant tax incentives for investors to support early-stage firms, thus boosting innovation and economic growth.
- Incorporate AI into retail investment products.
The entire testimony from Kacaba is available here.