This post was originally shared here by Devin Thorpe

Recently, the Crowdfunding Professional Association issued a list of policy positions taken by its Board of Directors. I’m proud to serve on the Board. We started work on this official set of recommendations last year while I served as President. Crowdfunding lawyer Jenny Kassan has led the effort from its beginning. CfPA President Brian Christie now champions the policies.

Under Brian’s leadership, the CfPA will be hosting a Summit in Washington, DC, on October 22nd and 23rd. The first day of the event will be devoted to meetings with policymakers in their respective offices. We’re targeting meetings in four different Congressional offices, along with meetings with the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA). Conference registrants will be invited to participate in the meetings they choose.

Drawing on my personal experience working on Capitol Hill, I’ll lead the team meetings there.

The policy positions are intended to make small offerings easier and more affordable, enhance disclosure requirements to benefit both issuers and investors and create tax incentives for investors, benefitting small businesses.

What follows is my take on several of the policy recommendations that I find especially important and personally champion.

Reform of Requirements for Financial Reporting

The reporting requirements for Regulation Crowdfunding offerings are remarkably complex. Offerings up to $124,000 require certified GAAP financial statements. Offerings up to $1,235,000 require a financial review (much more formal and expensive than that word implies), and those above $1,235,000 require a formal audit. There is no exemption for newly formed businesses with no operating history.

The CfPA is recommending three key changes, all of which I support strongly:

1. Raise the $124,000 to $250,000. The CfPA has informally expressed support for the Securities and Exchange Commission’s Small Business Capital Formation Advisory Committee’s proposal to raise that threshold to $350,000. I’ve previously expressed my support.

2. Allow Tax Return Disclosure. Rather than require small businesses to prepare a new set of financial statements based on GAAP, CfPA recommends allowing them to disclose the tax returns they are already required to prepare. This eliminates the need to pay to have a second set of financial statements prepared. This is consistent with the SBA’s requirements for small business loans.

3. Exempt Newcos from Financial Statement Requirements. A rather obvious step for simplifying offering requirements and reducing expenses will be to eliminate the need for newly formed businesses to provide financial statements, regardless of the scale of the offering. The CfPA and I support this change.

These changes would have a rather dramatic impact on the cost of and time required for a Reg CF capital raise. This will benefit both entrepreneurs and investors. When issuers save time and money on a raise, it is easier to raise more money and increase the chances of success, benefiting investors, too.

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