The US Senate has overcome its fears about “crowdmuppeting” and passed an amended version of the JOBS Act, a bill that will make it easier for start-ups to raise money and avoid regulations.
Earlier this week, the bill had stalled amidst fears that it would lead to scams as a result of letting small firms raise money online and from social media (critics called this “crowdmuppeting” — a riff on a Goldman Sachs term for ignorant investors).
Crowd-funding is already popular through sites like Kickstarter that let entrepreneurs describe a project and encourage donations.
Securities regulations, however, forbid entrepreneurs from giving their crowdfund contributors a stake in the company.
That will change under the new Jumpstart Our Business Start-ups law which will allow companies to raise up to $1 million from crowd-funding websites.
The bill overcame objections after the Senate added an amendment which included the $1 million limit and a rule that would force websites acting as fund-raising platforms to register with the SEC.
The rest of the House’s original JOBS Act remains intact, including key provisions that spare young companies a series of SEC regulations that were put in place after the Enron accounting scandals.
While the regulations were intended to protect investors, they have also been criticized for forcing companies like Facebook to go public before they were ready and for imposing onerous and expensive compliance procedures.
23 Senators objected to the amended Senate bill which one described as “predatory.”
Politico reports that the White House supports the bill and is encouraging the House to pass it next week. The House passed the original version and is not expected to object to the Amendment.