Put crowdsourcing back into equity crowdfunding

Everybody and their sister are cottoning on to how the equity crowdfunding exemption within the JOBS Act is a textual mess.

The original McHenry bill that passed the House last year had the benefit of having gone through a committee, where it was discussed, amended, passed . . . and sent on to be discussed and amended again by the full House.

The Senate, bowing to the political momentum behind the JOBS Act, knew it had to pass something that might be called "crowdfunding," but above all else it prioritized killing McHenry's bill.

Why was the Senate content to accept the House versions of the IPO on-ramp, the broker-dealer safe harbor for angel groups and incubators (also introduced by McHenry), the shareholder threshold triggering public company reporting, changes to Reg A - not so much as a semicolon wrong - but so adamant to undo McHenry's crowdfunding bill?

I don't know for a fact, but I suspect the McHenry bill had no constituency strong enough to resist the savaging it took from federal and state regulators, in the months after the House first passed it.

In retrospect, would it have been better for crowdfunding advocates to not have worked with Senators Brown, Merkley and their staffs, to have said, instead, give us the McHenry bill or stuff it? (But that's a what-if; many advocates didn't think the McHenry bill was perfect and were open to it being changed.)

The process of rulemaking won't reconcile the inconsistencies and contradictions in the legislative exemption; rulemaking has to deal with the outright hostility that's baked into the legislation. 

The Congressional amendment that would help: mandate that the Securities Act should not apply; restore the provision from the McHenry bill that information should be freely disseminated; put crowdsourcing back into equity crowdfunding.

Let the country experiment with a new paradigm and revisit it in a few years to assess.

Image: Frederic Poirot / Flickr.