A huge, immediate surprise in the Title III crowdfunding rules proposed yesterday by the SEC: the Commission proposes to enable discussion of a Title III offering with and among the crowd.
Permitting the crowd to talk to the issuer, and enabling the crowd to talk amongst themselves about a given deal, was an express feature of the original, popular McHenry crowdfunding bill, which passed the House overwhelmingly in 2011 and had the support of the White House.
The SEC proposes to put the crowd back in.
Here is a sentence from the text of the proposed rules. It's in section labeled "Advertising," which, broadly speaking, limits communication surrounding an exempt crowdfunded offering outside of the chosen funding portal; but on the approved portal, chatting would appear to be okay:
"Notwithstanding the prohibition on advertising the terms of the offering, an issuer may communicate with investors and potential investors about the terms of the offering through communication channels provided by the intermediary on the intermediary’s platform, provided that an issuer identifies itself as the issuer in all communications."
Even more in the spirit of the original (rejected) McHenry bill, here is a section of the propose regulations that talk about potential investors comparing notes within a forum on the funding portal:
"Communication Channels. An intermediary must provide on its platform communication channels by which persons can communicate with one another and with representatives of the issuer about offerings made available on the intermediary’s platform, provided:
"(1) If the intermediary is a funding portal, it does not participate in these communications other than to establish guidelines for communication and remove abusive or potentially fraudulent communications;
"(2) The intermediary permits public access to view the discussions made in the communication channels;
"(3) The intermediary restricts posting of comments in the communication channels to those persons who have opened an account with the intermediary on its platform; and
"(4) The intermediary requires that any person posting a comment in the communication channels clearly and prominently disclose with each posting whether he or she is a founder or an employee of an issuer engaging in promotional activities on behalf of the issuer, or is otherwise compensated, whether in the past or prospectively, to promote the issuer’s offering."
Are there any administrative law problems with the agency improving the statutory provisions in this manner?
I don't know. But it is a strong signal that the SEC is not as cynical about these rules as the Senate was about McHenry's original bill.
Photo: Leslie Jones, collection of Boston Public Library / Flickr.