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North Carolina bill would allow investment crowdfunding

posted May 11, 2013, 11:26 AM by Sallar Khorram   [ updated May 11, 2013, 11:27 AM ]

North Carolina legislators are moving forward with a bill to allow small investments via crowdfunding, a measure they say would help local start-ups that are waiting on action from Washington.

The federal “JOBS” act laid out a path for crowd-funded investments nationwide, but the necessary regulations haven't been written.

The state bill, sponsored by Rep. Tom Murry (R-Cary) and three House, would ease regulations for securities offerings of less than $2 million and allow individuals to invest up to $2,000. The total cap would be $1 million for companies without audited financial statements.

“Businesses need access to capital,” Murry said. “That’s what this bill is about.”

Murry said he foresees the U.S. Securities and Exchange Commission finalizing the necessary rules for national crowdfunding some time between 2014 and 2016. If Murry’s bill becomes law, it would expire in 2017, with the expectation that the federal system would be able to take over.

“The goal is to give North Carolina a jump-start,” Murry said.

"I think there is some frustration among some people that the SEC hasn't written these rules," said David Smyth, a former SEC supervisor who practices at Brooks Pierce in Raleigh and is one of several securities attorneys advising legislators on the bill. "The SEC is still stacked up with Dodd-Frank rule-making."

The state law would be limited in scope because SEC restrictions still limit securities offerings that cross state lines. Companies raising money through crowdfunding would have to register with the North Carolina secretary of state and would be able to sell shares only to state residents. The process would entail a small fee, currently envisioned as $150. 

The House of Representatives’ Committee on Commerce and Job Development approved the bill in an “overwhelming” voice vote on Wednesday, said Murry, the committee’s chairman. It still has to be approved by the chamber’s Finance Committee, by the full chamber, and by the Senate, and ultimately signed by Gov. Pat McCrory.

Murry said he’d like his own chamber to approve it by the end of the May, and that he’s confident about its chances with the Senate and governor.

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