Monday, October 19, 2015

NC Secretary of State Elaine Marshall Calls for Passage of the NC PACES Act Crowdfunding Bill in Next Session

North Carolina Secretary of State Elaine Marshall was the keynote speaker at the investment crowdfunding symposium held at Campbell Law School in Raleigh last Friday. Among her many duties, she is responsible for implementation and enforcement of all investment securities laws in the state through the Securities Division of the Department of State. A large and enthusiastic crowd of securities attorneys, entrepreneurs, and law school students listened as the Secretary gave a very interesting review of the NC PACES/JOBS Act investment crowdfunding bill, explained its many benefits, and discussed why it would be a very good exemption which would allow a new safe and fair method of funding for small businesses and startup businesses in our state. She went into detail on how the legislation provides a good balance between ease and cost of implementation for small businesses, while providing the appropriate investor safeguards. She made a strong case as to why we should give it another try in the 2016 session. As she stated in her opening remarks:

Secretary Elaine F. Marshall

"Thank You! Before I begin, let me just add my own welcome to all of you for attending this important symposium at my beloved Alma Mater!
As a Campbell Law alumna from “a few years ago” I enjoy seeing what a wonderful addition to the North Carolina legal landscape this School has become!
Ok! Now I have to confess something! When I made my plea many, many weeks ago to speak here today, I assumed I would be talking to you about North Carolina’s exciting, brand-new crowdfunding law!
So, imagine my surprise when the recent very long General Assembly session ended without crowdfunding legislation being passed into law!
Oops! False start, it has been like a track event where the runners are on the blocks, they are all set, the starters gun goes off, but in a split second the gun goes off again – a false start. We feel like that runner who must start over.
This means we need it to happen next legislative session.
Why? Because we do not have an investment-based, or equity, crowdfunding law in North Carolina right now.
We have donation-based crowd sourcing—which is the Kickstarter type thing where friends and supporters can donate small amounts to get a limited project funded.
Plus, because of federal law, certain North Carolina “accredited investors” can invest through crowdfunding.
Where does that leave everyone else?
Well, we could just do a “wait and see” to find out if there will be new laws coming out at the federal level that cover more people.
But that is not really a plan so much as it is a hope.
No, I think we need to look at trying for a state bill again next legislative session.
I believe it is doable. A lot of people have been working for several years now, including many North Carolina General Assembly members, to bring crowdfunding into law here.
We just need one more try in 2016 I think."

We would like to thank Secretary Marshall and her team for their continued support. You can read the complete text of her keynote address on the Secretary of State website at
http://www.secretary.state.nc.us/news/





Thursday, October 8, 2015

North Carolina General Assembly Adjourns Without Considering the Crowdfunding Bill

Unfortunately, the NC JOBS/PACES Act investment crowdfunding exemption bill (S481) has once again failed to make it through the NC General Assembly. They adjourned without taking up the bill for discussion, and it languished in the Senate Finance Committee all year. This despite the fact the bill had the support of the Governor, the Lieutenant Governor, the NC Commerce Secretary, the NC Secretary of State and the Securities Division, and the startup and small business communities all over the state that would have benefited from this new form of financing.

As of May this year, 19 other states have already passed a similar exemption, and an additional 20 other states have one in process. States like Texas, Indiana, and others shown on the map are already successfully helping small businesses get started and grow using both debt and equity crowdfunding based on these exemptions. So this represents a huge missed opportunity for North Carolina to join the 21st century and wake up to what is happening in the financial industry. There was no opposition to the bill, and it didn't cost taxpayers a penny. The exemption was a grass roots effort to help solve the lack of financing that has tortured the small business community ever since the 2008 banking collapse. While investment crowdfunding will be working well in many other states, the small business and startup communities here will continue to suffer.

As one supporter said on hearing the news, "I think we need a new motto: first in flight, but last in crowdfunding!" Sad but true.