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© Krantz News Service, March 30, 2014

A growing number of states have recently passed legislation enabling crowdfunding for small enterprises. It's a way for startups to raise small amounts of investment capital from a large number of investors.

Washington is the latest state to act. Governor Jay Inslee signed the bill last Thursday.

The bill exempts certain small securities offerings from registration under the Securities Act of Washington if first filed with and declared exempt by the state's Department of Financial Institutions.

Georgia, Kansas, Maine, Michigan and Wisconsin have already acted to ease restrictions on crowdfunding. Other states are considering measures, as well.

Federal securities law had long granted same-state issuers and purchasers an "intrastate offering exemption." Then in 2012 Congress passed the Jumpstart our Business Startups (JOBS) Act, which allows non-accredited individuals to invest small amounts of money in private companies.

The SEC has proposed rules on the the JOBS Act, but has not finalized them.

In the state of Washington, lawmakers found that "the costs of state securities registration often outweigh the benefits to Washington start-ups seeking to make small securities offerings and that the use of crowdfunding for business financing in Washington is significantly restricted by state securities laws."

The bill sets clear restrictions to protect small investors. '

Restrictions include a crowdfunding cap of $1 million during any 12-month period, and the aggregate amount sold to any investor by an investor during the 12-month period preceding the date of sale may not exceed the greater of $2,000 or 5 percent of the investor's annual income or net worth if the investor's income or net worth is less than $100,000.

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