In a response letter to Representative Darrell Issa (R-CA) dated April 6, 2011, Mary Shapiro, the Chairman of the Securities and Exchange Commission (“SEC”), indicated that the SEC would be reviewing the feasibility of, among other things, a new exemption from registration for micro-financing or “crowdfunding.” Crowdfunding generally refers to the pooling of small contributions from a large number of people to finance some particular purpose or venture. In an example described to the SEC for the possible exemption, a company would be permitted to conduct an offering of up to $100,000, with a cap on individual investments of $100. Proponents of the proposed exemption view this as a viable way for small start-up companies to raise essential early stage capital at a low cost while minimizing investment risk because of the low cap on individual investment. The SEC is currently soliciting comments from the public on this topic. Public comments are available here.
To view Chairman Shapiro’s letter click here.