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Department Proposes Rules That Facilitate Crowdfunding-Type Investments for D.C. Small Businesses

Friday, August 8, 2014

The D.C. Department of Insurance, Securities and Banking today issued proposed rulemaking that seeks to facilitate crowdfunding-type investments and encourage capital raising opportunities by D.C. residents for D.C.-based small businesses.

The proposed rulemaking, “District of Columbia-Only Securities Offerings Exemption,” would establish a localized exemption from the District’s full securities registration requirements in order to simplify and encourage investing in D.C.-based small businesses.

“The goal of this proposed rulemaking is to provide an innovative way of raising capital that is both beneficial to the District’s small business community and contains the appropriate safeguards for investors,” said Chester A. McPherson, acting commissioner of the D.C. Department of Insurance, Securities and Banking.

To qualify for the exemption, the business must be organized under D.C. law, have its principal place of business in the District and the securities in the offering must be offered only to D.C. residents. The proposed method of funding (up to $2 million) will be available only to D.C.-based businesses, and the offerings must be in compliance with the limitations on intrastate offerings under the federal Securities Act of 1933 and the implementing regulation.

The notice of proposed rulemaking can be found here as published in the August 8, 2014 issue of the D.C. Register. More information about the proposed rulemaking can also be found at disb.dc.gov/crowdfunding.