Legislature(2015 - 2016)BELTZ 105 (TSBldg)
02/11/2016 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Crowdinvesting and Economic Development in Alaska | |
| SB126 | |
| SB108 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 126 | TELECONFERENCED | |
| *+ | SB 165 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 108 | TELECONFERENCED | |
SB 126-SMALL SECURITY OFFERINGS
2:18:29 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 126.
2:18:43 PM
WESTON EILER, Staff, Senator Mia Costello, Alaska State
Legislature, introduced SB 126 on behalf of the sponsor,
paraphrasing the following sponsor statement:
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 at the time of sale. In
addition to the cap, an escrow deposit is required, as
is an agreement acknowledging high risk investment.
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, and changes the paradigm for start-ups.
2:21:09 PM
MR. EILER addressed a question from Senator Meyer saying that SB
126 creates an exemption in statute and applicants would have to
go through the Division of Banking & Securities to access it. He
said there are a number of safeguards that protect state policy
and investors.
2:23:59 PM
SENATOR STEVENS voiced concern about investor safety and asked
if the process has worked in Oregon.
2:24:35 PM
MR. EILER offered to get that information. He noted an update in
members' packets from The National Council on State Legislatures
(NCSL) and a spreadsheet of intrastate crowdfunding legislation.
He said it is a new area and there are a variety of success
stories and challenges.
2:25:51 PM
CHAIR COSTELLO stated her intention to hold the bill in
committee.
2:26:34 PM
KEVIN ANSELM, Director, Division of Banking and Securities,
Department of Commerce, Community and Economic Development
(DCCED), provided information related to SB 126. She reported
that there are a number of states that have crowdfunding
statutes or regulations on their books. While there have not
been many losses relating to crowdfunding, there have been some
securities losses, which is why the enforcement provisions are
important and the division will be watching closely.
2:27:32 PM
SENATOR STEVENS asked what the director's responsibility is
regarding crowdfunding.
MS. ANSELM explained the department's role is receiving simple
crowdfunding applications. She related that Alabama has been
successful for several years with its application process and
crowdfunding offerings. They have very simple application
requirements which Alaska is hoping to copy. She added that most
of the details would be listed in regulations due to things
changing quickly, such as the delivery method and the financial
market. She noted it is difficult to change the law.
SENATOR STEVENS asked whether the department would analyze the
merits of a proposed business.
MS. ANSELM explained that Alaska is not a "merit review state,"
it is a "disclosure state," so the department would look for
proper disclosures.
2:29:50 PM
SENATOR MEYER gave an example of investing $5,000 in a startup
company such as a brewery, and having a beer named after the
investor. He asked what the equity ownership would be.
MS. ANSELM clarified that it is considered crowdfunding if there
is some potential for profit and the investor is expecting a
return. There would not be potential for profit in the previous
example.
2:31:12 PM
SENATOR GIESSEL noted crowdfunding can't exceed $1 million and
$7,500 per person so it could not be used for the Alaska LNG
Project.
MR. EILER agreed. He said the Department of Revenue is exploring
how average Alaskans could invest in a large diameter AK LNG
pipeline.
2:32:10 PM
CHAIR COSTELLO opened public testimony.
2:32:20 PM
THOMAS DALY, Owner, HiSpeed Gear, testified in support of SB
126. He said the bill provides opportunities for Alaskans during
a time of financial challenges. He shared a story from his
youth. He maintained that SB 126 will help Alaskan businesses by
allowing Alaskans to invest in them. He testified that large
corporations do not last in Alaska and are not the answer. He
described how clusters of businesses could be developed and how
profits could remain in the state. He concluded that the bill
will provide Alaska with a sustainable future.
2:34:54 PM
JASON HOKE, Executive Director, Copper Valley Development
Association, testified in support of SB 126. He said the bill is
an opportunity for small businesses in a difficult financing
climate. It could allow urban investors to invest in businesses
in rural areas and elsewhere in the state. He offered to assist
in the filing of applications.
2:37:17 PM
CHAIR COSTELLO held SB 126 in committee with public testimony
open.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 126.PDF |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 126 Sectional Analysis.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 126 - Fiscal Note.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| 2015.10.07 DCCED Background Document - Essence of Crowdfunding.pdf |
SL&C 2/11/2016 1:30:00 PM |
|
| SB 126 - Background Document - NASAA State Crowdfunding Legislation Index.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 126 - Background Document - NCSL Intrastate Crowdfunding Update 2015.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 126 - Background Document - Pew Charitable Trust Article - States Clear Way for Crowdfunding.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 108 - Testimony - R. Banks - Alaska Securitites Act Reform-Crowdinvesting.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 108 |
| SB 126 - Sponsor Statement.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| 2016.02.11 - Why Crowdfunding Matters Presenation – Michael Shuman.pdf |
SL&C 2/11/2016 1:30:00 PM |