Crowdfunding Amendments – H.B. 16-1049
By: Herrick K. Lidstone, Jr., Burns, Figa & Will, P.C.
The 2015 General Assembly adopted, and Governor Hickenlooper signed, the Colorado Crowdfunding Act (adding § 11-51-308.5 to the Colorado Securities Act). The Securities Commissioner adopted rules to implement the Colorado Crowdfunding Act (“CCFA”) before its effective date (August 1, 2015), and crowdfunding is off and running in Colorado.1 Since then, five companies have filed Form CF-3 with the Colorado Division of Securities to be on-line intermediaries through which crowdfunded securities can be offered:2
– Colorado Equity Crowdfunding (coloradoequitycrowdfunding.com),
– EquityEats, Inc. (www.equityeats.com, “if you love food, you’ll love investing in restaurants”),
– EzyXchange Ltd. (www.ezyxchange.info “choose between the privacy of a Rule 504 offering or
an equity crowdfunding offering”),
– MassVenture CO, Inc. (www.massventure.co, “invest in your community, keep your money nearby”), and
– Invest Local, LLC. (investlocalcolorado.com).
On October 30, 2015, the Securities and Exchange Commission adopted Regulation Crowdfunding (“Regulation CF”). This contains significantly greater restrictions than the Colorado provisions, and has not been widely praised. Crowdfunding is local, and likely to remain local. With Regulation A+ and proposed amendments to SEC Rule 504 and Rule 147 (SEC Rel. 33-9973, October 30, 2015), federal law will likely have little influence and, while Regulation Crowdfunding may be a satisfaction of the SEC’s obligations under the 2012 JOBS Act, it will likely have little additional impact.3
Colorado House Bill 2016-1049 (sponsored by Representative Pete Lee and Senators Mark Scheffel and Owen Hill) sailed through the General Assembly and was signed by Governor Hickenlooper on March 9, 2016. H.B. 1049 is effective upon the Governor’s signature.4
The 2016 amendments to the CCFA will have a positive impact on crowdfunding in Colorado by making two minor changes. The first is to expand the list of companies that can hold the funds received from a crowdfunding offering in escrow; the second reduces the escrow requirements.
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