--- title: "Associations Grapple With Startup-Funding Law" id: "13811" type: "post" slug: "associations-grapple-with-startup-funding-law" published_at: "2012-10-12T18:30:53+00:00" modified_at: "2026-03-17T17:40:18+00:00" url: "https://associationsnow.com/2012/10/12/associations-grapple-with-startup-funding-law/" markdown_url: "https://associationsnow.com/2012/10/12/associations-grapple-with-startup-funding-law.md" excerpt: "While crowdfunding associations have come out in favor of the JOBS Act, other associations worry about the startup-funding law's ramifications for investors." taxonomy_category: - "Advocacy" taxonomy_post_tag: - "AssociationsNow" - "Business" - "investor protection" - "self-regulation" - "startup funding" taxonomy_content_format: - "Article" taxonomy_role: - "Association CEO / Executive Director" taxonomy_persona: - "Executive Leadership" --- [Home](https://associationsnow.com/) » [Articles](https://associationsnow.com/format/article/) » Associations Grapple With Startup-Funding Law Should investing in a startup be so easy that anyone can do it? While [some crowdfunding organizations (opens in a new tab)](http://associationsnow.com/2012/09/crowdfunding-association-makes-promotional-push/) have cropped up to support a budding industry, many associations are concerned about the ramifications of the JOBS (Jumpstart Our Business Startups) Act, passed earlier this year to simplify things for firms looking for investments. The law includes a rule making it easier for groups to advertise to potential investors in their for-profit businesses, which the Consumer Federation of America and the North American Securities Administrators Association (NASAA) warn could prove dangerous to investors. Regulations on private investments have been eased over the years, with an exemption in securities law, [Rule 506 of Regulation D (opens in a new tab)](http://www.sec.gov/answers/rule506.htm) , allowing investors to raise money for their companies without going through numerous regulatory hoops. But allowing startups to advertise such investments is bad news, the associations say. “Lifting the advertising ban on these highly risky, illiquid offerings, without requiring appropriate safeguards, will create chaos in the market and expose investors to an even greater risk of fraud and abuse,” said NASAA head Heath Abshure [in a statement (opens in a new tab)](http://www.nasaa.org/16162/investor-advocates-and-state-securities-regulators-call-on-sec-to-rethink-jobs-act-rule/) . “Without adequate investor protections to safeguard the integrity of the private placement marketplace, investors should and will flee from the market, leaving small businesses without an important source of capital.” [As The Verge points out (opens in a new tab)](http://www.theverge.com/2012/10/10/3479884/sec-jobs-act-general-solicitation) , Rule 506 was a hit when it first took effect in 1982 and played a large role in the rise of startup culture. But it has been abused in the past, and could be abused further by companies taking advantage of individuals who may not understand the nuances of investing. Other groups, including [Americans for Financial Reform (opens in a new tab)](http://ourfinancialsecurity.org/2012/10/afr-in-the-news-sec-jobs-act-rule-comes-under-fire/) , [AARP (opens in a new tab)](http://www.aarp.org/politics-society/government-elections/info-03-2012/jobs-act-consumer-protection.html) , and the [AFL-CIO (opens in a new tab)](http://www.aflcio.org/About/Exec-Council/EC-Statements/The-Jobs-Act-A-Cynical-and-Dangerous-Return-to-the-Politics-of-Financial-Deregulation) , have also come out against the regulatory changes in the JOBS Act. Does the JOBS Act endanger investors or enable crowdsourcing? Let us know what you think in the comments. (TMG archive photo) [Ernie Smith](https://associationsnow.com/author/ernie-smith/) Ernie Smith is a former senior editor for Associations Now. [More articles by this author](https://associationsnow.com/author/ernie-smith/) Tags: [#Business](https://associationsnow.com/tag/business/) [#investor protection](https://associationsnow.com/tag/investor-protection/) [#self-regulation](https://associationsnow.com/tag/self-regulation/) [#startup funding](https://associationsnow.com/tag/startup-funding/) **Stay Informed** [Subscribe to our free newsletter](https://associationsnow.com/newsletter/) , *Associations Now Daily News*, to find out what’s happening in the association world every business day. ## You Might Like - [VideoThe Career Moves Every Association Leader Needs Right NowSeptember 24, 2026](https://associationsnow.com/2026/09/24/the-career-moves-every-association-leader-needs-right-now/) - [VideoUrban Land Institute- Project Recovery: Rebuilding Los Angeles After the January 2025 WildfiresSeptember 24, 2026](https://associationsnow.com/2026/09/24/urban-land-institute-project-recovery-rebuilding-los-angeles-after-the-january-2025-wildfires/) - [VideoNCRA: Safeguarding Cancer Surveillance: An Advocacy Response to FY26 Budget ThreatsSeptember 24, 2026](https://associationsnow.com/2026/09/24/ncra-safeguarding-cancer-surveillance-an-advocacy-response-to-fy26-budget-threats/) - [VideoASAE Legislative Summit 2026March 26, 2026](https://associationsnow.com/2026/03/26/asae-legislative-summit-2026/) ## Comments **Comments are for ASAE members.** [Learn more about comments on this site.](https://associationsnow.com/comments/) [Log in](https://associationsnow.com/login?redirect_to=https%3A%2F%2Fassociationsnow.com%2F2012%2F10%2F12%2Fassociations-grapple-with-startup-funding-law%2F%23comments) to your member account or [join ASAE](https://my.asaecenter.org/select-a-membership-type/) !