While federal regulators continue to develop rules enforcing crowdfunding laws, a New Jersey senator is pushing state legislation to expedite matters.
State Sen. Joe Kyrillos, (R-Middletown) is introducing a bill that will allow New Jersey residents to invest in state-based businesses in ways parallel to the federal JOBS Act. The national bill, broadly aimed at easing the ability of early-stage companies to raise capital through online vehicles, passed Congress last year, but not all provisions have taken effect.
Kyrillos' bill would allow New Jersey-based entrepreneurs to seek up to $1 million in private investments, in increments up to $5,000, from unaccredited investors living in the state.
Kyrillos said that the legislation would loosen "paternalistic government regulations" and "antiquated roadblocks" that have "precluded small investors and businesses from opportunities only availed to a select few on Wall Street."
"Frankly, there is no reason to embrace laws enacted in the 1930s that have outlived their usefulness," Kyrillos said. "The economy is still troubled. Financing is hard to come by. Millions of people understand intuitively that when there is a good idea, people would like to risk their capital to make that a success."
While companies and investors await full implementation of the JOBS Act, several more states have taken measures to speed action, including Georgia, North Carolina, Kansas and Wisconsin.
Mark Roderick, a corporate and business attorney at Cherry Hill firm Flaster Greenburg, said such actions are largely symbolic. The real impact, Roderick said, will occur when the Securities and Exchange Commission approves remaining provisions of the JOBS Act affecting the entire country.
"Especially when we are talking about raising money through the Internet, you have to be able to cross state lines," Roderick said.
The SEC is still developing rules over a key provision of the JOBS Act, called Title III, enabling private companies to raise $1 million over a 12-month period under fewer regulations than public markets. Many observers don't expect rules to be implemented until next year. Critics contend that regulations need to be tight to prevent fraud.
Under Title III, companies can raise that money from accredited and unaccredited investors through online platforms overseen by the Financial Industry Regulatory Authority and the SEC.
The New Jersey legislation grants oversight to the Division of Consumer Affairs' bureau of securities. Kyrillos, who plans to introduce his bill Monday, said he will seek Democratic co-sponsors.
A separate provision of the JOBS Act allowing companies to publicly advertise their efforts to raise capital, though vehicles like social media or print publications, went live Monday. Such solicitation was previously banned under an 80-year old rule.