shift from the conversation. obviously, educational attainment is a high priority for us but land grant universities are involved in addressing the global challenges as the gates foundation. we think of this 21st century model as addressing food security and opportunities for economic women, public health. could you tell us, just spend a few minutes talking about the most exciting opportunities that you see for america's universities to be engaged in the kind of work that drives you around the globe. >> i think universities are doing a far better job making their students aware of conditions around the world. when i almost graduated from harvard, i had no sense of living conditions around the world. today, universities have lots of

courses. they attempt to get students throughout and bring in the information. i think that awareness alone is a good thing. i know when the foundation goes to work on better seed, get rid of crop disease, design new vaccines, to build better toilets, it really re-enforces that u.s. universities are the cutting edge. 70% of our grants, if anything, we try to go to institutions and the developing countries themselves. we had two equally scientific proposals, we would favor the poor country where the problem is in that location.

for most of what we do, the lead university will be a u.s. based institution. they are doing a good job partnering with institutions to build up their capacity and run the trials. there's some secondary benefits that come from that. one thing, even though we're talking about this very tough challenge of these budgets, i do want to share with you my optimism for the state of innovation. the fact that other universities around the world are going to participate in innovation, that's a good thing. just in the u.s. alone, the speed of innovation whether it's in material science, understanding chemistry at this basic digital level, energy type advances across the board. understanding how to make new vaccines. the immune system. a lot of that pushed through by trying to understand diseases like aids.

agriculture, it's so exciting. thank goodness that plants have the same genetics as humans because so much money, billions and billions were spent to create sequencing tools. the deep understanding of plant disease, plant productivity, this is the golden age of innovation. great professors, grad students at your institutions are doing the things that allow our foundation to be very optimistic about improving life in the countries, the poor countries whether it's childhood deaths that are now down to eight million a year. i can see path to get that to four million and get that down to two million. malnutrition. will we have enough food to feed the planet? i think innovation even despite

the head winds of climate and limited resource, i think we'll be able to meet that challenge. it's almost a paradox that the importance of the work and innovation is stronger than ever. >> absolutely right. that's challenge we'll accept and we look forward to working with you and the gate foundation. thank you for being here to help us recognize and celebrate this important event in the history of our country and higher education. thank you for challenging us today. thanks for your partnership with the gates foundation with american public higher education. we appreciate it. >> thank you. [ applause ]

good afternoon. thank you all for being here today. this is the sub committee on tar financial services of private

programs. i'll start today's hearing as we always do by reading oversight government forms mission statement. the oversight committee mission statement. first americans have a right to know that the money washington takes from them is well spent. second, americans deserve an efficient effective government that works for them. our duty is to protect these rights. our solemn responsibility is to hold government accountable to taxpayers. we will work tirelessly and partner with citizen watchdogs to deliver the facts to the american people and bring reform to t . i will recognize myself for five minutes for the purposes of an

opening statement. approximately three years into our economic recovery, america's lay dor and cap pal markets continue to face unprecedented challenges. the u.s. unemployment rate is now been above 8% for 40 consecutive months and nearly 24 million americans are either out of work or underemployed despite various government driven initiatives. to make matters workout dated and oftentimes new government regulations continue to limit the ability of small businesses to access capital, which is the life blood of our economy. repairing and strengthening our markets will not occur overnight nor will it be accomplished by more government regulation. the focus of today's oversight heari ining is on a bipartisan signed into law this past april meant to promote capital formation by relax various

securities law. the jobs act is a significant victory. i'm proud that the efforts by this committee initiated by chairman darrell issa back in march of 2011, his letter to the securities exchange commission chairwoman helped develop the jobs act and modernized our securities loss. the elimination on the band of general solicitation. a rule that's been in place since 1933 will improve the ability of small private businesses to communicate with investors and raise capital. a company may have before registering with scc has been

welcomed as a logical adjustment. it reduces the number of instances a company is forced to endure a complicated filing process merely because it attracted too many accredited institutions. after introducing the first crowd funding bill in congress, i reached out to my colleagues on the other side of the aisle to bald bipartisan coalition so that we can enact this bill, to address these concerns of the interested parties. specifically, i want to commend congresswoman carolyn maloney who serves on this subcommittee and serves with me on the financial services committee.

we don't often see eye to eye on matters of public policy, but in this instance, we collaborated and worked together to take the legislation i introduced to improve it. caroline has a number of concerns about fraud and a number of investor protection ideas. we worked very diligently, very diligently to craft a very balanced bill that we're able to pass not just out of committee but on the house floor. before it came to a vote on the house floor, president obama put forward a statement of administrative policy that he endorsed and signed the bill. well, unfortunately, due to a few senators that misinterpreted the spirit and promise of crowd funding, the senate inserted imperfect provisions that

jeopardized the vitality of equity based funding and complicated sec rule making. as the sec considers comments crowd funding, the crowd funding tielt of the jobs act it's clear that the 11th hour changes have unnecessarily made sections of the job act ambiguous and inconsistent. today's hearing serves as an opportunity for congress to hear from knowledgeable folks that either participate in the arena of crowd funding as it now exists. it's not equity based. crowd funding as it now exists market participants and academic experts about these provisions of the jobs act. i want to get their thoughts. that's what this is about. our attention is for congress interested parties and the sec to work together to ensure that

effective rules and policies are promulgated that will allow crowd funding to flourish. if crowd funding flourishes, i think our small businesses have another opportunity to flourish. i thank the witnesses for making the trip here. . i recognize the ranking member for five minutes. >> thank you. i want to thank you for holding this hearing. the jobs act was passed. it will create a unique status for emerging growth companies that will allow the companies greater flexibility and testing

the ipo waters. the act will lift restrictions on the ability of the start-up companies to raise capital. start-ups if they survive the earliest years make an outside contribution to sustainable job growth. under title 3 they will be able to raise the capital they need. at the same time the regulatory restrictions that were rolled back by the jobs act were put in place for a reason. there are legitimate concerns that exempting this type of activity from securities regulation will open or expand opportunities for fraud. just as clean water standards keep our waters safe to drink, financial regulations protect us

against unsafe products. while congress judged there were too many hurdles to raising capital, the sec's mission is still to protect investors and maintain fair, orderly and efficient markets. it should follow the same process and procedures as in the past. there's no reason the jobs act should be prioritized in front of pending dodd-frank rule makings which have been delayed. the same standard should apply to all the sec makings that are required by law. i also believe that dodd-frank and the jobs act are two sides of the same coin. before and during the financial crisis our financial regulations were deficient. as banked collapsed and the housing market bottomed out, investors lost their savings, homeowners lost their homes and millions of americans lost their jobs. we will ensure that the next generation of americans is not so vulnerable to financial

catastrophe. we can recognize that not all regulations are necessary and some may need to protect it. that's why i was proud to support the jobs act. going forward i am eager twork with t to work the sec to see they are worked together in a timely fashion. thank you. i yield back. >> members will have seven days to submit opening statements for the record. we will now recognize our panel. mr. brian cartwright is a score lar-in-resident at the marshal school of business, and former general counsel of the securities and exchange commission. thank you for being here. mr. alon hillel-tuch is the

co-funder and ceo of rockethub. it's a fantastic crowd funding site. doing exciting things and mr. c. stephen bradford is a law professor at university of nebraska. mr. john coffee jr. is a fro professor at columbia law school. please raise your right hand. do you swear or affirm that the testimony you're about to give will be the truth, the whole truth and nothing but the truth? all right. thanks. you may be seated. let the record reflect that the witnesses answered in the affirmati affirmative. we have the lights set up for

you. they're very simple. red means stop. yellow means hurry up and finish. green means go. we'll give you five minutes to summarize your opening statements. your opening statements, your written statements will be in as part of the record. we'll begin. mr. cartwright, you're recognized for five minutes. >> chairman mchenry, members of the subcommittee. you've honored me with your invitation to appear before you today. i thank for having me. you have my written testimony, and i won't try to rehearse that testimony again here in these brief remarks. instead i want to frame questions and discussions followed by offering my perspective on why the jobs act was passed with the support of the administration by overwhelming votes in both houses of congress and why i think we're here today. i believe the jobs act was

passed because there's a widespread, fullily bipartisan understanding that something that gone quite wrong in the worltd world of american companies. the number of public companies, exchange lists companies has declined dramatically. in the roughest of numbers, we have gone from having somewhere around 8,000 exchange listed companies to something in the vicinity of 5,000. that's a dramatic drop. it's happened because not enough companies are signing up to dpo public to replace those who drop out. the number of initiate public officers has trended down far below previous levels. the most alarming may be this, and i know this from my days in practice. back in the day, venture capitalists would take a successful, innovative new company public, and many of

those companies would then blossom and grow and produce countless jobs. we know that most of the jobs come after a company goes public. that's what used to happen upwards of 80% of the time. today that number has flipped. today over 80%, approaching 90% of successful venture backed companies are acquired rather than taken public. that makes all the difference in the world because we know that acquisitions rather than growing jobs often subtract jobs because the acquirer seeks to achieve efficiencies as the press release will refer to it. i ask you to just imagine what the world would be like today if microsoft had been managed to make it as attractive as possible to its most likely potential acquirer, ibm and ibm

had acquired it. i submit to you that if that haa very different city today, and replicate that hundreds of times over, and the u.s. would be a very different country today. public companies that were originally venture-backed are estimated by some to contribute something like 20% of our current gdp. imagine the problems we'd be facing if we didn't have that 20% today. i think those are illustrative of the developments that i believe led to the jobs act which in my view makes only quite modest incremental tweaks to the existing system. time will tell, but those modest incremental tweaks may well prove insufficient to get us where we need to be, and maybe some of the questions you'll be asking will be directed that

way, but the jobs act is a welcome broadly bipartisan attempt to move us in the right direction, and, of course, even those modest steps have been resisted by the defenders of the status quo so the s.e.c. needs to be encouraged to move with all deliberate speed to implement the jobs act promptly and faithfully. and i thank you very much, and i eagerly look forward to your questions on this important topic. >> mr. hillel-tuch. >> so mr. chairman mchenry, ranking member quigley and members of the committee who are able to attempt, my name is alon hillel-tuch, co-founder and cfo for rockethub and i welcome the opportunity to provide testimony on the job, act and the proper limitation of government barriers for small business background formation. robert yub is an established website, one of the largest in the world. we provided a platform for the

launch of over 8,000 campaigns so far since 2010 and raised over $2 million to support entrepreneurs and small businesses. these successful campaigns have provided funding to businesses of all types, from a local bakery, to a start-up developer of medical devices, to enabling the financing of a film production. crowd funding really is the application of new technology to an old idea. people have always sought support in their community to help raise money for new business. the advent of web-based social networking allows people to expand their community to their online friends and to benefit from the lower costs of the web-based platform. thanks to title 3 of the jobs act crowd funding in the u.s. will soon expand to the entrepreneurs who are supporters, and we at rockethub look forward to this development and intend to register as a crowd funding portal in the jobs act. while i believe the jobs act will benefit small businesses in the u.s., i believe it impact can be improved for the proper

use of the security and exchanges commission in real making. i see three areas of improvement. i'll try to fit it into the time that i have. in the jobs act, congress provided that issuers using crowd funding platforms must provide investors with certain information, included audited financial statements where the issuer seeks to raise more than 500,000 or such other amount as the commission may establish. i believe that this $500,000 threshold is too low and that the you had a mitted financial statements should not be required unless the issuer seeks to raise 1 million. crowd funding typically attracts startup companies and small businesses and audited historical financial statements of these types of companies may have little or no operations or relevance. they do not provide investors with more meaningful information as compared to unaudited financial statements. yet, they impose a significant cost on the entrepreneur which might -- might really kill this. making this change could save small businesses tens of thousands of dollars for opening up the opportunity for them to take full advantage of the

platform. a second area where the commission should exercise its discretion in rule making is really by minimizing up front expenses to the entrepreneurs and small businesses that seek to crowd fund. crowd funding platforms usually charge fees for successful projects. this allows small businesses to access crowd funding at a minimal initial cost which is critical. if they attract support for their projects, then they have the funds to pay fees. if their idea does not attract supports, the costs are minimal. no support is charged and the entrepreneur can come back in the future with a new idea. in implementing the jocks act, it's important to the commission consider this free frequent steuer. platforms should be able to charge fees on successful projects while imposing costs on projects that do not attract funding this. structure allows more small companies to use crowd funding while reducing the risk if they are unable to attract financing. one area that congress should address the jobs act is to raise the crowd funding exemption to 5 million from 1 million.

the higher amount will allow more small businesses who need capital to use effective crowd funding methods. currently a company that seeks more than 1 million is unable to use crowd funding and must still rely on traditional venture capital angel kraft skors, credit card debt or small business loans. these sources may not be available to all businesses, especially startups, women and minority-led businesses, and those additional small businesses that fall outside of the high-tech bottle. raising this limit will allow crowd funding to more effectively compete as a source of funds for venture capital and bakes and giving small businesses more options to drive down financing costs. crowd funding can be an important economic tool to help small businesses grow and help drive job creation. limiting the costs associated with audited financials to raise it above 1 million and aligning the interest of companies, inve investors and platforms we can

revise the structure of crowd funding. these reforms for the types of companies that choose to raise capital and expand the role of crowd funding a business expense. we would like small investors the ability to participate in the growth and success of a wider range of companies, including those in their communities. so i'm going to quickly close with a quick response to two common questions. first, is will crowd funding lead to a lot of fraud by issuers? no. it won't. in fact, crowd funding structures help minimize help. crowd funding is highly transparent and a substantial feedback from participant. it helps increase players and keep them honest. i thank you for your time, and i'm looking forward to questions. >> thank you. thank you so much. professor bradford. >> chairman mchenry, ranking member quigley and members of the subcommittee. good afternoon. my name is steve bradford. i've power sore of law at the

university of nebraska. much of my work focuses on small business capital formation under federal securities law, and it's an honor to be able to address you on that subject today. i've recently written two articles on crowd funding, and i would like to focus my comments on the crowd funding provisions of the jobs act. i believe the crowd funding could spark a revolution in small business financing, opening up much-needed new sources of startup capital, but whether that happens depends in good part on the regulatory burden. those small offerings will be possible only if the cost of complying with securities regulation doesn't consume a large portion of the offering proceeds. the new federal securities law crowd funding exemption created by the jobs act is an important first step but that exemption isn't complete until the s.e.c. enacts and implements regulations. the usefulness of the crowd funding excels will depend in part on how the commission

exercises its rather substantial regulatory authority. my written statement includes a number of specific recommendcations concerning the crowd funding rules, and i'd be happy to discuss any of those with the members of the committee, but in the time available i want to limit myself to four important points. first, cost is a critical consideration for the very small offerings that crowd funding facil talts. because of that i believe the s.e.c. crowd funding regulation should be as light-handed and unobtrusive as possible. in the name of investor protection, the statute already imposes significant regulatory requirements on both crowd funding issuers and on the brokers and funding portals who act as intermediaries in crowd funding offerings. adding additional layers of regulation on top of those requirements would increase the cost of using the exemption without much additional benefit and would also be inconsistent with the thrust of the jobs act, to reduce the regulatory burden on small business capital

formation. second, to the extent that any additional regulation is required, it should be imposed on crowd funding intermediaries, brokers and funding portals rather than on the entrepreneurs raising funds. crowd funding intermediaries will be more sophisticateded and more heavily capitalized than the small business issuers engaging in crowd funding. those brokers and funding portals can afford securities council to guide them through the regulations. they will also be repeat players so they can spread any regulatory costs over a large number of offerings. because of that i think it makes sense to center the regulation on those intermediaries rather than the companies raising money. third, the s.e.c. crowd funding regulation should be clear, concries and written in plain english. the s.e.c. requires corporate disclosures to meet those requirement in order to understand and facilitate funding by investors. in drafting the crowd