NEW YORK (AP) — Companies looking forward to raising money online have been waiting for about a year to find out how the process will work. It looks like they're going to be waiting even longer.
The Securities and Exchange Commission does not know when it will be able to issue rules to help small businesses raise investor money over the Internet, officials of the agency told a congressional hearing Thursday.
The Jumpstart Our Business Startups, or JOBS Act, which passed a year ago, includes a provision that allows small businesses to use crowdfunding, a method of raising money from a large number of people over the Internet. The SEC planned to have those rules ready by the end of 2012, but officials who testified at a hearing of the House Small Business Subcommittee on Investigations, Oversight and Regulations said it's not known when the rules governing crowdfunding will be issued.
"It's very difficult for our staff to create any expectations on timing," said John Ramsay, acting director of the SEC's Division of Trading and Markets.
The SEC is undergoing a leadership transition that has contributed to the delay. Former Chair Mary Schapiro resigned in December. Her successor, Mary Jo White, was sworn in Wednesday.
The complexity of writing rules about crowdfunding has also slowed the process, Lona Nallengara, the SEC's acting direction of its Division of Corporation Finance, told the subcommittee.
"These rules are in many respects fundamental changes to the way private offerings have operated," he said.
Subcommittee members criticized the SEC for the delays. Chairman David Schweikert, R-Ariz., noted that the act was passed in April 2012 with high expectations that small businesses would soon be able to find investors online.
"A year later, I feel like I'm breaking people's hearts," Schweikert said.
Ramsay and Nallengara said some of the delays resulted from the need to be sure that individual investors are adequately protected from the risks of investing in small, little-known companies.