CFIRA Members Are Optimistic for Equity Crowdfunding in 2013

November 27, 2012

By A. Brian Dengler

November 27, 2012 - Despite news that the chair of the SEC will step down next month, CFIRA members remain optimistic that the SEC will formulate rules to govern equity crowdfunding under the JOBS Act by the end of 2013. Board members of the Crowdfund Intermediary Regulatory Advocates (CFIRA) made the comments during a webinar sponsored today on BrightTalk entitled "What You Need to Know Regarding Jobs Act Implementation."

Dara Albright

On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act (the JOBS Act), which among other things, allows small businesses to raise up to $ 1 million per year from small investors through online crowd funding portals.  The JOBS Act requires the Securities and Exchange Commission to implement rules to govern equity crowdfunding before such investing can take place. The statute set a deadline for the end of 2012 for the rules, but experts believe the rules realistically will roll out toward the end of 2013.  CFIRA provides an industry input to policy makers such as the SEC and FINRA regarding crowdfund investing.

CFIRA board Member Douglas Ellenoff, a partner with the firm of Ellenoff, Grossman & Schole, told moderator Dara Albright of NowStreet that he remains optimistic that crowd fund investing rules may be out by the "back half of 2013."

Mr. Ellenoff projected the following time table for crowdfunding rules:

  • Proposed rules in January 2012.
  • A public comment period of 60 to 90 days.
  • Staff review for 60 days.
  • Final rules in the third or fourth quarter of 2013.

Doug Ellenoff

Mr. Ellenoff also urged that FINRA work in tandem with the SEC to develop rules as the self-regulator group for the portals, intermediaries and brokers. Mr. Ellenoff believes that most of the delay in rolling out rules for equity crowd funding is a "misperception of what crowdfunding is - - - or isn't."

"There are plenty of investor protection features in crowdfunding," Mr. Ellenoff said. Unlike other forms of equity investing, crowdfund investing under the JOBS Act is limited to how much a small investor makes or is worth. Other protections include:

  • Crowdfunding may only be conducted through approved and regulated funding portals and brokers.
  • Entrepreneurs are limited to what they can communicate to the public about their campaigns; details of an offer must be made through an authorized intermediary.
  • Funding portals cannot individually market specific deals.
  • No incentive fees can be paid by the funding portal or entrepreneur to induce potential inventors.
  • Investors must undergo education before they can invest.
  • Entrepreneurs must make financial disclosures.
  • Investors are limited in what they may invest to a portion of their net income/net worth.
  • Investors will benefit prior to making an investment decision by the public social media communication about individual deals and the promoting entrepreneurs.

Vince Molinari

CFIRA Co-Chair Vince Molinari, CEO of Gates Technologies, called crowd funding a "game changer" because it creates a new market infrastructure to deliver capital. "It represents the first iteration of change in which we embrace social media … the wisdom of the crowd to really put forth the individual investor aggregating for a common cause."

"The crowd is efficient. Be careful not to underestimate its power," said Richard Salute of the accounting, tax and advisory firm of Cohn Reznick. Salute suggests that entrepreneurs think about the following questions when they consider launching a crowd funding campaign:

  • What are your objectives and expected outcomes?
  • What is the solution you are offering?
  • Why is it relevant?
  • Describe the revenue model and anti pated income.
  • Describe why the entity's valuation is appropriate.

Sara Hanks

CFIRA board member Sara Hanks, CEO of, stressed the importance of good disclosure in making a crowd fund offering. "There are a good number of studies out there that show good disclosure doesn't just make you less liable to getting sued and having bad things happen to you, but good disclosure, because it removes the uncertainty in investors' minds, actually improves the stock price or offering price of any security."


Click here to see the Webinar.

Feature image under license (c)

Article by A. Brian Dengler. Mr. Dengler is the editor of, an instructor in emedia management and media law at Kent State University and an attorney who focuses his practice in Information Technology Law. He is a former Vice President of AOL, Inc. and an EMMY winning news producer.

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