Thank you for the thoughtful question! This issue aligns with CfPA's policy priorities, and here is our position on it.

Investment Funds Excluded from the Definition of Investment Companies

We request the following amendment to Title III of the JOBS Act:

The current statute provides that Title III does not apply to any issuer that “is an investment company, as defined in section 80a–3 of this title, or is excluded from the definition of investment company by section 80a–3(b) of this title or section 80a–3(c) of this title.”

We propose striking the bolded language so that companies excluded from the definition of an investment company under Sections 3(b) and (c) of the Investment Company Act may raise funds under Regulation Crowdfunding.

Background

Companies excluded from the definition of an investment company under Sections 3(b) and 3(c) of the Investment Company Act include

A company organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual 
A company substantially all of whose business is confined to making small loans, industrial banking, or similar businesses.
A company primarily engaged in one or more of the following businesses: (A) Purchasing or otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services; (B) making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance, and services; and (C) purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.
A company substantially all of whose business consists of owning or holding oil, gas, or other mineral royalties or leases, or fractional interests therein, or certificates of interest or participation in or investment contracts relative to such royalties, leases, or fractional interests.
A church plan described in section 414(e) of title 26, if, under any such plan, no part of the assets may be used for, or diverted to, purposes other than the exclusive benefit of plan participants or beneficiaries.

Even though securities offerings by these types of organizations are exempt from coverage by the Investment Company Act, these companies are not permitted to be raise funds under Regulation Crowdfunding pursuant to Section 4a(f)(3) of the 1933 Act.

We are especially concerned about organizations excluded under Section 3(c)(10). There are not many nonprofit investment funds in the country that would benefit from being permitted to raise funding under Reg CF, but there are a few nonprofit funds that are currently raising funds from community investors under state law and using those funds to provide highly beneficial community based economic development programs to underserved populations. One example of this is the Boston Ujima Project. These programs would greatly benefit from the opportunity to use Reg CF and they do not present any greater risk to the investing public than a typical Reg CF issuer. 

Requested Change

We propose that Title III of the JOBS Act be amended to allow companies excluded from the definition of an investment company under Sections 3(b) and (c) of the Investment Company Act to raise funds under Regulation Crowdfunding.

Statutory Authority

This change would require an amendment to the statute.