Crowd Funding Bills Stall in Congress

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The growth of social media websites over the last ten (10) years has led many entrepreneurs to seek opportunities to access capital through their online networks, such as Facebook and LinkedIn. This “crowd funding” model of raising capital has had some limited success in the form of gift giving to the issuer; however, crowd funding in exchange for an economic interest in the issuer is currently impermissible under federal and state securities laws. As a result of these legal limitations, crowd funding has failed to grow as a capital raising strategy. In order to provide greater access to capital available through the crowed funding method, three (3) bills were introduced in the Senate in the fourth quarter of 2011 aimed at expanding the exemptions available to issuers under Section 4 of the Securities Act of 1933 (the “Act”).

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