Crowdfunding Industry Leaders React to State Lawsuit Blocking Regulation A+

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CFIRA and the CfPA Issue Joint Statement Re State Lawsuit Against the SEC to Block Implementation of Regulation A+


In a joint statement released today by the leadership of crowdfunding industry associations Crowdfunding Intermediary Regulatory Advocates (CFIRA) and the Crowdfunding Professional Association (CfPA), both organizations commented on a lawsuit filed in the U.S. Court of Appeals (Galvin v. SEC, DC Case No. 15-1150) on May 22, 2015, by the Commonwealth of Massachusetts, calling for the Court to invalidate the SEC’s recently promulgated Regulation A+.

Title IV of the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) was enacted into law by Congress with overwhelming bi-partisan support, and 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 is as follows:
“We stand arm in arm in support of the U.S. Securities and Exchange Commission in support of the final Regulation A+ rules. 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.

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).

We 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.

This most 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.

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.”

For further information on CFIRA and CfPA, please visit our respective websites, and
Media Contacts:
Crowdfunding Regulatory Advocates (CFIRA)
Joy Schoffler, Committee Member

Crowdfunding Professional Association
Samuel S. Guzik, Chair and President310-914-8600

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Joy Schoffler
Leverage PR
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