A number of states adopt a new process for small companies to sell to the public.
A number of states are adopting a new process for companies to sell to the public up to $1 million in stock a year without Securities and Exchange Commission involvement.
Washington State was first to adopt the method, called the U-7, in September 1988 under the name ULOR (Hotline, February 1989, [Article link]). It's based on SEC Rule 504, which in 1982 deregulated very small public offerings at the federal level. The SEC no longer required registration and placed no restrictions on solicitation or the number of investors. But a maze of state regulations remained, and since small offerings provide little profit for securities professionals, entrepreneurs faced a dearth of expert advice. So 504 offerings never really took off.
The U-7 standardizes the 504 process. The 49-question application can be business plan, prospectus, and state registration. It is relatively jargon free, so company owners need only the help of their attorney and CPA to complete it. There are some restrictions -- for example, a share must be at least $5. According to Washington State's David Dougherty, eight states already have adopted the U-7.
Still, a usable form doesn't make it easy to sell stock. One big problem remains -- a lack of brokers who will sell such small offerings.