March 16, 2015
If you are thinking of using crowd-funding to help your business take wing, please note: Massachusetts is considering a regulation that would define how much money you can raise, over what period, and from whom. Earlier this year the Commonwealth’s securities division adopted an emergency regulation on this subject, and — with an eye to crafting a more permanent version — is currently accepting comments. In addition to the temporal, geographic, and dollar-amount limits, the regulation requires that entrepreneurs publish certain “risk disclosures.”
To its credit, the division’s official request for public comment poses questions about the relationship of the state regulation to its federal equivalents and the potential for Massachusetts collaborating with other states. Given the fact that the emergency regulation is already on the books and that the state securities division is on the verge of promulgating the updated version, I suppose it’s too late to call the whole thing off. But small-business owners may well wonder, do we really need state-level rules and an interstate compact to further regulate (and hamper) this particular online activity?
A pubic hearing is scheduled for Tuesday, March 24, at 10:00 a.m. in Boston. In the meantime, if you have an interest in building businesses through crowd-funding, I recommend that you (1) take a look at the mandatory Small Business Impact Statement (scroll down past the public hearing notice) which states that the regulation’s purpose is to “foster job creation by helping small and early-stage Massachusetts companies find investors and gain greater access to capital with fewer restrictions; (2) read the regulation; and then (3) ponder the compatibility of points (1) and (2).