By Joseph Santiesteban

Part of President Obama’s recently released American Jobs Act proposes altering the Securities Act of 1933’s rules on Initial Public Offerings (IPOs) to include a crowdfunding exemption and to raise “the cap on ‘mini-offerings’ from $5 million to $50 million.” The goal is to reduce burdensome regulations on small businesses that currently have limited options in seeking financing by taking advantage of social networks’ ability to “crowdfund,” in which a large number of investors contribute small sums of money to projects.

Currently, the Securities Act prohibits firms from publicly selling or advertising stocks or other interests in its firm’s profits without first going through the onerous process of registering an IPO with the SEC (Form S-1). This process often prices out many small firms that can’t afford the time and expense of filing. The primary exception to the standard IPO process is a “mini-offering” made pursuant to Regulation A. These offerings require a less thorough inspection by the SEC, but are currently limited to offers of less than $5 million.

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Earlier this summer, Governor Jerry Brown signed into law a budget bill that required online retailers like Amazon to start collecting state sales tax as of July 1, 2011.The passage of ABX1 28 (Blumenfield) prompted Amazon to initiate a campaign to place a referendum on the ballot that would overturn the new online sales tax.The online retailer had already spent over $5 million on the referendum campaign and was prepared to collect the necessary 504,000 signatures required within 90 days of filing with the office of the California Attorney General to place the referendum on the ballot. To show its virulent opposition to the bill, Amazon has already cut ties with some 25,000 affiliate businesses in California.

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