House Passes Federal Crowdfunding Exemption; Some State Authority Preserved

Yesterday, the House of Representatives passed Representative McHenry's bill, H.R. 2930, which would create a federal crowdfunding exemption. The vote was 407 in favor and 17 opposed.


We last visited the bill on this blog when it had been approved by the House Financial Services Committee. At that time, Representatives McHenry and Perlmutter had agreed to work out language to clarify that, while the federal crowdfunding exemption should trump state law, state securities regulators would retain jurisdiction over fraud and bad acts.

For a federal crowdfunding exemption to work, it has to preempt state laws that could otherwise impose, state by state, additional and inconsistent regulatory requirements. (That said, a Senate version of a crowdfunding exemption, soon to be introduced by Senator Brown, may be written to permit a state to impose prescriptive regulation on crowdsourced offerings, when half or more of the investors reside in that state.)

Well, here in pertinent part is that language, added to McHenry's bill in the form of an amendment offered by Perlmutter on the House floor yesterday:

    "The amendments made [in this bill to preempt state law] relate solely to State registration, documentation, and offering requirements . . . and shall have no impact or limitation on other State authority to take enforcement action with regard to an issuer, intermediary, or any other person or entity using the exemption from registration provided by [the federal crowdfunding exemption].

The full text of the amendment is here.

I had hoped last night to reconstruct the full House crowdfunding bill, as amended by the various amendments approved in the House yesterday, but just didn't have the time. I'll plan to link to the integrated text of the bill, as passed, when the official version is posted. Meantime, let's shift focus to analysis of the Senate bill.

If a similar bill passes in the Senate and the House and Senate versions are reconciled, a crowdfunding bill is going to become law. The Obama administration supports the House bill.

The SEC rulemaking under such a new law is going to be . . . interesting.

Video posted to YouTube by Rep. McHenry.

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