Legislature(2015 - 2016)SENATE FINANCE 532
04/05/2016 05:00 PM Senate FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB126 | |
| SB154 | |
| SCR4 | |
| SB69 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 126 | TELECONFERENCED | |
| + | SB 154 | TELECONFERENCED | |
| + | SCR 4 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 69 | TELECONFERENCED | |
SENATE BILL NO. 126
"An Act establishing an exemption for the offering and
sale of certain securities."
5:05:42 PM
SENATOR MIA COSTELLO, SPONSOR, explained the legislation:
Senate Bill 126, the Innovating Alaska Act, helps
Alaskans start and invest in local businesses by
enacting a new finance mechanism in state law.
Crowdinvesting (sometimes known as "equity
crowdfunding") is a new concept with a simple premise.
Instead of receiving large investments from a few
traditional investors, Alaskans starting a business
receive small investments from a potentially a large
group of investors. The approach lets broad groups of
people invest in small businesses in return for equity
ownership. This makes it easier for business start-ups
to get capital to grow, and allows average Alaskans to
invest in businesses being started in their
communities.
The federal Jumpstart Our Business Start-Ups (JOBS)
Act of 2012 paved the way for this paradigm shift in
business creation. It refines some of the more onerous
regulations that have historically made it difficult
for average Americans to directly invest in private
companies. Since then over 12 states have enacted
intra-state crowdinvesting laws.
Crowdinvesting usually works through young companies
selling equity shares, often through an on line
portal, to a wide group of investors. Senate Bill 126
would regulate the sale of these types of securities
separately from the Alaska Securities Act (AS
45.55.010) and adds several safeguards to protect
investors.
Under Senate Bill 126, businesses seeking to raise
capital through crowdfunding would apply to the Alaska
Division of Banking & Securities and hold investor
funds in escrow in an Alaskan bank. Investments made
through crowdinvesting are limited to $7,500 for
investors and $1,000,000 for businesses raising
capital. Both the investor and business owner must be
Alaska residents.
Business start-ups are key to growing our state's
economy. Enacting crowdinvesting through Senate Bill
126 is an innovative way to give entrepreneurs easier
access to capital, and help Alaskans invest in local
businesses.
5:09:12 PM
WESTON EILER, STAFF, SENATOR MIA COSTELLO, presented the
Sectional Analysis (copy on file):
Section 1. Amends the Alaska Securities Act (AS 45.55)
by adding a new section. Sec. 45.55.l75(a) exempts the
sale of securities through crowdinvesting between
Alaska businesses and residents from the requirements
of AS 45.55.070 - 45.55.120 (registration of
securities) and AS 45.55.150 (sales and advertising
literature). Sets new limitations and requirements on
the offer and sale of this type of securities
including:
(1) issuer's organizational entity must be for-
profit, and located and licensed in Alaska,
(2) securities under this section may only be
sold to Alaska residents and must be in
compliance with federal law's (Securities Act of
1933) residency requirements for interstate sale
of securities,
(3) sale of securities under this section by a
for-profit entity are capped at $1,000,000,
(4) investments by an individual in a business
under this exemption are capped at $7,500 during
a 12-month period, (5) issuer of securities under
this section must have a reasonable belief that
the purchase of securities is for investment not
resale,
(6) commissions for persons participating in the
offer or sale for the issuer are prohibited,
(7) requires escrow account deposit of investor
funds until the minimum target for the issuer is
met,
(8) notice to the department about solicitation
of sale of securities under this section,
(9) restrictions on who may issue securities
under this section,
(10) disclosures to investors about this type of
securities exemption in statute and restriction
on resale,
(11) requires signed investor acknowledgement of
investment risk,
(12) exemption for sale of this type of
securities may not be used along with other
exemptions to the Alaska Securities Act,
(13) sale of this type of securities are covered
by anti-fraud statutes and other provisions under
AS 45.55.010 - 45.55.028.
Sec. 45.55.175(b). Allows the department to deny or
revoke an exemption under this section if the sale
would lead to a fraud on purchasers.
Sec. 45.55.l75(c). Requires the Department of
Commerce, Community, & Economic Development to charge
an applicant a filing fee for an exemption under this
section.
Sec. 45.55.l75(d). Prohibits an issuer from using the
exemption under this section if the entity or its
officers are subject to a disqualifier under the Dodd-
Frank Wall Street Reform and Consumer Protection Act -
U.S.C. 78c(a)(39).
Sec. 45.55.175(e). Defines terms for the section.
Section 2. Adds a sec. 45.55.175 exempting
transactions under this bill to the list of
transactions that are exempt from basic security
registration requirements under AS 45.55.070 and AS
45.55.075 (the section addressing federal covered
securities).
5:13:47 PM
Senator Dunleavy wondered if one could currently micro
invest under different rules. Mr. Eiler replied in the
affirmative.
Senator Dunleavy surmised that the bill was related to a
business that wanted to go public. Mr. Eiler explained that
the legislation targeted startup companies. He remarked
that it was a mechanism for large groups of Alaskans with a
small amount of money could invest in private companies.
Senator Dunleavy stated that current law already allowed
for the partnership. Mr. Eiler replied that the bill
offered another tool for a general solicitation without a
broker dealer.
Senator Bishop looked at Section 13, and queried the
recourse. Mr. Eiler responded that the language reflected
that nothing was exempt from fraud statutes.
Senator Bishop surmised that the investor had a vehicle to
recover some funds. Mr. Eiler replied in the affirmative.
5:18:07 PM
Senator Olson queried the type of people the legislation
was intending to invest. Mr. Eiler responded that there
were many opportunities, especially in rural areas. The
bill would remove some hurdles, to make is easy for
Alaskans to invest in small companies such as
microbreweries and arts businesses.
Senator Olson queried any protections for the elderly. Mr.
Eiler replied that he had conversations with the Division
of Banking and Security. He stated that the division had
worked to monitor that problem.
Senator Bishop spoke in support of the legislation.
5:22:25 PM
RENEE WARDLAW, DIVISION OF BANKING AND SECURITIES,
ASSISTANT ATTORNEY GENERAL, ANCHORAGE (via teleconference),
introduced herself.
Co-Chair MacKinnon queried feedback on the legislation. Mr.
Wardlaw replied that the division was neutral on the bill.
Co-Chair MacKinnon wondered whether the public was
protected under the legislation. Ms. Wardlaw replied in the
affirmative.
Co-Chair MacKinnon queried any exemption from the Alaska
Security Act. Ms. Wardlaw replied in the negative.
5:24:50 PM
THOMAS DALY, OWNER, HISPEED GEAR, KENAI (via
teleconference), testified in support of the legislation.
He felt that the bill helped to diversify the state's
economy. He wanted to empower small businesses. He did not
feel that the legislature was properly diversifying the
state. He remarked that the bill would engage Alaskans in
businesses. He shared his phone number: 907-283-9136.
Co-Chair MacKinnon CLOSED public testimony.
SB 126 was HEARD and HELD in committee for further
consideration.
5:27:33 PM
AT EASE
5:28:18 PM
RECONVENED