"Crowdfunding," where groups of people pool money, is a new method of capital raising that is gaining interest. It is typically comprised of very small individual contributions to support an effort by others to accomplish a specific goal, such as funding startup companies and small businesses, raising money for disaster relief, artists seeking support from fans, and political campaigns. Proponents of crowdfunding are advocating for exemptions from the Securities Act registration requirements in an effort to assist early stage companies and small businesses.
The issue of crowdfunding and other capital raising reforms is now on the administration's agenda. On September 8, 2011, in his remarks in a speech to a joint session of Congress, President Obama addressed the SEC's upcoming efforts to engage in capital-raising reform, stating that the administration is "planning to cut away the red tape that prevents too many rapidly-growing start-up companies from raising capital and going public." Shortly thereafter, the SEC announced the formation of the Advisory Committee on Small and Emerging Companies which is intended to provide a formal mechanism through which the SEC can receive advice and recommendations specifically related to privately held small businesses and publicly traded companies with less than $250 million in public market capitalization, including with respect to crowdfunding.
On September 15, 2011, Meredith B. Cross, the SEC's Director of the Division of Corporation Finance, presented testimony on crowdfunding and capital formation before the House Oversight & Government Reform Committee, indicating that the SEC staff was reviewing the issue and considering proposals. She indicated that the SEC is looking at easing restrictions on crowdfunding as part of a wideranging review of its rules governing capital-raising. Cross stated that she expects the SEC to complete its broad review in the near future.