North Carolina residents would be able to invest small amounts in new in-state ventures through crowd funding under a bill that cleared the Senate Commerce Committee on Wednesday.

The measure, which has already cleared the House, would allow most companies to raise up to $1 million in capital – $2 million if they have undergone a financial audit – through “unregistered securities.” Essentially, companies would be able to sell shares, mainly online, directly to small investors rather than through the stock market.

Each individual investor would be limited to purchasing $2,000 in “unregistered securities” unless that person is an “accredited investor,” a term that implies both a certain level of financial savvy and having enough money to risk.

Congress has already passed a federal crowd-funding law that would ordinarily govern such transactions. However, the agency responsible for putting that law in place has not yet adopted needed rules.

“The Securities and Exchange Commission has a case of the slows,” Rep. Tom Murry, R-Wake, told the committee.

House Bill 680 would expire on July 1, 2017, Murry said, under the assumption that federal rules would be in place by then.

The Secretary of State’s Office would oversee these transactions and collect quarterly reports on these investments.

“We feel very comfortable with what’s being proposed,” said Angela Dunston, a legislative liaison for the Secretary of State’s Office.

New markets bill attached

Senators tacked a completely separate economic development bill onto the crowd-funding measure. This new bill has not been vetted by the House but has been heard in open committee hearings at least once this year.

Sen. Rick Gunn, R-Alamance, said the New Markets Tax Credit would help lure $208.3 million in investments into North Carolina. The measure is similar to a federal new markets credit but does not rely on the federal measure.

North Carolina levies a gross premiums tax on insurance companies for the privilege of doing business in North Carolina. This bill gives those insurers a tax credit in exchange for investing in qualified “community development entities.” Those companies would then provide funding to small businesses that otherwise wouldn’t be able to find capital.

Under the measure, 75 percent of the money raised would have to go to the state’s most economically distressed counties. The remainder could be invested in any county, as long as the project was in an economically distressed area.

“We’re talking about economic gardening,” said Jeff Craver of Advantage Capital Partners, a company that raises and invests this kind of funding.

The investment companies, he said, would look for companies that have been rejected for traditional bank loans, often due to federal rules on collateral.

Sen. Gene McLaurin, D-Richmond, asked if there was any job creation requirement, as was attached to other state economic development programs. Gunn said no, noting that the point of this program was to provide money to start-up or expanding businesses in areas where such funding is hard to come by.

“We have got a fundamental market failure in a certain segment of our economy,” Gunn said.

The measure next goes to the Senate floor. It would then return to the House, where members would have to decide whether to accept the Senate changes or send the bill to a conference committee to negotiate their differences.