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Public Statements

Entrepreneur Access to Capital Act

Floor Speech

By:
Date:
Location: Washington, DC

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Ms. VELÁZQUEZ. Madam Chair, I yield myself such time as I may consume.

In order for entrepreneurs to continue to fulfill their traditional role as job creators, it is essential that they have access to the capital they rely upon as fuel for innovation and economic expansion. Crowdfunding represents a promising new tool for this service. But in order to realize its full potential, investors who buy these securities must be able to make fully informed decisions. My amendment will make this possible by requiring crowdfunding intermediaries to disclose how they are compensated.

Despite its relatively recent emergence, crowdfunding shares many characteristics with ordinary stock investing. In this marketplace, however, Web sites and social media will fill the role of brokers and dealers. They will act as a conduit between stock insurers and ordinary investors. Unlike stockbrokers, these intermediaries may be paid by commission, flat fees, or subscriptions. Depending on their compensation structure, however, intermediaries may have an incentive to advertise the ideas that provide them with the most money, rather than what makes the most investment sense. This not only puts ordinary investors at risk but also undermines the entire premise of crowdfunding, which is supposed to promote those ideas that have the most merit.

Compensation disclosure is not without precedent. It is currently required by all securities brokers and dealers. This transparency provides investors with the vital information necessary to have the confidence that their investment decisions are prudent. Furthermore, these disclosures take nothing more than a few lines on an offer sheet or a quick conversation. This is a simple commonsense amendment that will help ordinary people make informed investment decisions as this new industry evolves. If intermediaries are going to fill the role of brokers and dealers in crowdfunding operations, it only makes sense that just like others in the investment industry, they should be subject to similar requirements to protect the investors they will solicit.

I urge Members to vote ``yes'' on the amendment, and I reserve the balance of my time.

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Ms. VELÁZQUEZ. I yield myself the balance of my time.

It amazes me that given the experience that brought us to this time, that brought the economy to its knees with the Wall Street crisis, with the Madoff Ponzi scheme, that you come here and say this is not the appropriate time. It is the appropriate time to protect investors, and that is exactly what we do here.

Compensation disclosure, for the investors to have the information to know who their intermediaries are and how they are going to be compensated, this is the appropriate time. This is the right time. It is important that we protect investors by them knowing how those intermediaries will be compensated, how their money will be invested. What makes more sense for an intermediary to invest in this company versus this other company, because if he invests in this other company he's going to make more money? What is wrong with transparency? What is wrong with disclosure? Nothing is wrong.

You have three pages of protection, but you left the most important protection for investors. What is wrong with the investor to know how those intermediaries will be compensated? That is the core of my amendment. And we should, just like brokers and dealers, they will have their own business interest and they will not necessarily be the same as investors' interest. Their interest and that of the investors are not mutually exclusive. Just like brokers and dealers, intermediaries will have discretion to choose which investment they propose.

I ask for a ``yes'' vote on my amendment.

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