CrowdFund Intermediary Regulatory Advocates

1345 Avenue of the Americas

New York, NY 10105
Telephone: (212) 370-1300
Via Electronic Mail
June 9, 2016
The Honorable Jeb Hensarling, Chairman
Committee on Financial Services
U.S. House of Representatives
Washington, D.C. 20515
Re: HR 4855, the Fix Crowdfunding Act.
Dear Chairman Hensarling:
This letter is sent on behalf of the Crowdfund Intermediary Regulatory Advocates (CFIRA), a
non-profit 501(c) 6 trade organization that lobbies and advocates for regulations that will support the
securities crowdfunding industry.
We write this letter in support of HR 4855, the Fix Crowdfunding Act. We are pleased that the
House Financial Services Committee continues to demonstrate an appetite for bi-partisan Congressional
leadership which is essential for the United States to continue on a path of economic growth and
prosperity. It is CFIRAs intention that HR 4855 will receive bi-partisan support and will be enacted into
law without further delay.
CFIRA was established after the signing of the Jumpstart Our Business Act (JOBS Act) in
April of 2012 to help establish the final rules for Title II, Title III and Title IV of the JOBS Act, in
addition to drafting the first Standards and Best Practices Guidelines for equity and debt crowdfunding for
the industry. CFIRAs role is to protect the interests of investors and issuers, and advance the common
business interest of intermediaries and third party service providers in the securities industry. Our
members comprise intermediaries (broker-dealers and funding portals), issuers, investors, and third party
service providers who are engaged in or who intend to engage in business under Titles II, III and IV.
CFIRA understands H.R. 4855 would implement a number of fixes to the current final rules
under the JOBS Act that would enable further transparency, due diligence, investor protections, the
opportunity to expand access to equity and credit through the buying and selling of securities from small
and medium enterprises through registered funding platforms and broker dealers and ultimately provide
the mechanisms to establish a secondary market. We appreciate Representative McHenrys continued
efforts to make securities crowdfunding more attractive and viable for small and medium enterprises.
This bill aims to take the parts of the finalized Title III crowdfunding rules and fix the areas that
are impracticable, if not entirely unworkable. CFIRA has initiated some of these changes though our

comment letters and meetings with the regulators, advocated and continue to support the changes that HR
4855 targets which includes the following:

1. Raises the annual issuance amount from $1 million to $5 million1;

2. Exempts the beneficial owners of crowdfunding securities from counting towards the Exchange
Act 12(g) requirement triggering public reporting2;
3. Exempts special purpose vehicles (SPVs) created for the purpose of investing in a single issuer of
crowdfunding securities from registration as investment companies under the Investment
Company Act, and permitting such SPVs, which are considered are venture capital funds, to
sell and offer crowdfunding securities;
4. Revises the investment cap so that investors earning $100,000 or less and investors earning more
than $100,000 may invest up to the greater of 5% and 10%, respectively, of their annual income
or net worth; 3
5. Defines the requirements for a crowdfunding intermediary to disqualify an issuer when the
intermediary through a background check or other means, determines that the issuer knowingly
made untrue statements or omissions related to material facts, or engaged in fraud4;
6. Defines a crowdfunding intermediarys potential liability to only instances when the intermediary
knowingly makes untrue statements or omissions related to material facts or knowingly engages
in fraud;
7. Permits an issuer to test the waters by soliciting non-binding commitments of interest from
potential investors without filing information with the SEC, provided that no funds are accepted
by the issuer and any material changes that occur between the solicitation and the offer are
highlighted to potential investors; and
8. Provides a 5-year grace period for portals to make a good-faith effort to comply with all
crowdfunding rules, and prohibits the SEC from bringing any enforcement actions during that
period.

Wales Capital, Letter 1 and Letter 3 Final Rules (pages 16 and 17), File No.: S7-09-13;
Limitation on Capital Raised, Section II.A.1; Release 33-9470,
https://www.sec.gov/comments/s7-09-13/s70913-253.pdf
2
CFIRA, Letter 9, Final Rules (page 328), File No. File No. S7-09-13; Ongoing Reporting
Requirements, Section II.B.2; of Release 33- 9470, https://www.sec.gov/comments/s7-0913/s70913-256.pdf
3
CFIRA, Letter 12, Final Rules (page 208), https://www.sec.gov/rules/final/2015/33-9974.pdf
4
CFIRA, Letter 8, Final Rules, (page 170), https://www.sec.gov/rules/final/2015/33-9974.pdf


Many of the CFIRAs proposed recommendations from the original letter have been considered in the
report on the review of the definition of Accredited Investor.
CFIRA is here to further assist efforts of the regulators in helping to build an ecosystem that supports the
JOBS Act. While expanding access to capital for businesses that seek funding through securities
Crowdfunding as an alternative mechanism. Please contact us with any questions at your convenience.
Respectfully submitted,

Kim Wales
Founder and CEO, Wales Capital
CFIRA, Executive Board Member

David J Paul
David J. Paul
Founder and CEO, DJP&Co.
CFIRA, Executive Board Member