BREAK IN TRANSCRIPT
Mr. McHENRY. I thank the chairman, and I appreciate the opportunity to address the crowdfunding section of this bill.
One year ago, Oversight Chairman Darrell Issa sent a letter with 33 questions to the Securities and Exchange Commission asking them to justify outdated securities laws that restrict capital formation and stunted job growth. It was a letter that really challenged the Commission's complacency and asked them about these 80-year-old regulations that were modern at the time where the new invention was the telephone and asked them if they had ways to update them.
One question specifically asked Chairman Schapiro if she had considered creating an exemption to enable everyday investors to invest, with reasonable limitations, in unregistered securities issued by start-ups. This is known as ``crowdfunding.''
At the time, I was only familiar with crowdfunding--which is a hybrid of microfinance and crowdsourcing--as a charitable method. It's done around the world, with billions of dollars of moneys raised. For example, a local brewery in my home State of North Carolina was able to raise $44,000 on a platform called Kickstarter. Now, that's done on the charitable side; but with crowdfunding, the success we see on the charitable side can be brought over on the investor side, on the equity side, of capital raising. We recognized the consequences of Dodd-Frank that limit the ability to get lending through traditional means and as a way to promote small business capital formation. Crowdfunding relieves part of that pressure.
In September of last year, after countless meetings, conferences, congressional hearings, and bipartisan negotiation, I introduced the Entrepreneur Access to Capital Act. The bill was simple and direct. It offered a means of capital formation that would forgo costly SEC and State registration if issuers and investors operated within reasonable limitations. Most importantly, the foundation of the legislation upheld investor protections by empowering regulators to prosecute those who participated in securities fraud or deceit. That is preserved.
In the Entrepreneur Access to Capital Act, our focus was on market innovation and investor protection to attract both political parties and well-known market participants to the table. As a result of that bipartisan bill, we had over 400 Members on this floor vote for that bill, the President said he would sign that bill, and we sent it over to the Senate with thousands of market participants saying it was good.
This year, that same language was included as a provision within this legislation, the JOBS Act. Regrettably, just before the House-passed version of the JOBS Act received an up-or-down vote on the Senate floor, a handful of Senators misunderstood the spirit and the promise of crowdfunding, resulting in last-minute changes to the bill.
Our essential framework is preserved for crowdfunding. Rather than recognizing that crowdfunding could create new markets and opportunities for small businesses and start-ups, these misguided Senators simply saw crowdfunding as unregulated activities. This misperception caused them to design a crowdfunding title that is riddled with burdens on issuers, investors, and intermediaries and limits general solicitation and enhances SEC rulemaking authority.
But, fortunately, as I said, the basic architecture of the Entrepreneur Access to Capital Act, crowdfunding, that bipartisan measure that we took through committee markup and House floor action, is preserved. Although I'm disappointed by the ill-conceived and burdensome changes within the crowdfunding title of this bill, I stand committed to working across the aisle to make sure that we fix this after the President signs it. That's what we intend to do.
I urge my colleagues to vote for this bill and move forward.
BREAK IN TRANSCRIPT