Crowdfunding Law

Let's Get Crowdfunding Right

Month: November, 2012

And Now for the SEC Update on Investment Crowdfunding . . . Bueller . . . Bueller . . . Bueller . . .

Well, after the SEC’s much anticipated Annual Government-Business Forum on Small Business Capital Formation yesterday, I’d hoped to post something of value regarding the state of the SEC’s effort to write the rules necessary for Title II and Title III crowdfunding.  After all, there was a fair amount of build-up that this event would be THE forum for an SEC update as to timing and substance of pending regulations and the title of the opening session was “JOBS Act Implementation.”  The update on implementation is: no update.  After spending most of yesterday listening by webcast and teleconference and exactly one week in advance of Thanksgiving, I am most thankful that I did not waste money on a flight to Washington.  Standing ready to take notes on the most important information, my computer screen was essentially blank at the end of the day.  Being much more diligent than I (and undoubtedly a better typist), Bill Carleton has an excellent live blog summary here.  My summary of the SEC position is rather simple: There are lots of issues. We are working on those issues. We do not know when we will get through the issues.  We will get back to you.  Stay Tuned.

Today there is absolutely nothing I can report that is of value to those who are wondering when any form of investment crowdfunding will be implemented under the JOBS Act.  Further, there is nothing I can report as to whether it is likely that any form of investment crowdfunding will be worth conducting, either for issuers or portals, after those rules are written.  No such luck.  There were plenty of questions raised (as with any public event, they ranged from good to asinine).  I do appreciate the time of the moderators who attempted to field questions, tried to fight through people on the phone who did not know how to operate their mute buttons and tried to provide something of value to those who were attending or listening.

Don’t get me wrong, I want the SEC to take time if they need time to get it right.  Brian Knight at Crowdcheck makes that point well here.  I, however, got more of a sense yesterday that the SEC is simply over thinking the issues and that the general regulatory instinct to build a fortress in advance of any sign of a conflict is carrying the day.  Just a hunch–but it seems increasingly likely.  The reality is that we don’t have to be overwhelmed by the potential issues of investment crowdfunding. As Jonny Sandlund has said before, the world has plenty of data showing the boogey men just don’t exist in investment crowdfunding.  Never-the-less, we Americans always think we invented everything and that nothing has been decided until we decide.  Perhaps the only good news is that the SEC is aware that their delay benefits those that are doing general solicitations in the US already.  According to Meredith Cross, if you are jumping the gun “You may hear from us, and you may already have heard from us.”  At least maybe those who are willing to play outside the rules during this period of delay will be held to account.  Stay Tuned.


Listen in or attend SEC’s Annual Government-Business Forum on Small Business Capital Formation

It is this Thursday and significant info regarding crowdfunding is anticipated. . .

I will post some thoughts afterwards and would be interested to hear others.

President Romney and Crowdfunding

On the eve of the election, I’ve been thinking about how a Romney presidency would impact investment crowdfunding in the U.S.  This isn’t a prediction as the odds seem to be that Romney will lose.  It isn’t a preference either.  It is just interesting to think about because of the timing of the election and pending regulations under Title II and Title III of the JOBS Act.  For that matter, it is also interesting to think about how a change from Mary Shapiro as head of the SEC will impact investment crowdfunding regulations, in terms of both substance and timing, even if Obama is reelected.  It is widely expected that Shapiro will leave even if Obama wins.  However, one would think that a new Obama appointee would keep more of the senior SEC staff in place that dictate internal policy.

What about Romney?  There is probably little to no difference on the legislative front.  Given that the odds are that Congress will remain divided after the election, with the Democrats retaining the Senate and the Republicans retaining the House, any type of major legislation is unlikely to happen for either candidate.  After this election, and in our hyper-partisan times, only a horse trade over the catastrophic financial cliff seems likely.  That is not going to include any modifications or fixes to the crowdfunding law.

However, the regulatory landscape could change quite dramatically.  The LA Times had an interesting piece on how a Romney driven change in leadership at Treasury and the SEC would potentially water down Dodd Frank based Wall Street reform.  For what it is worth, I see this as one of the bigger downsides to a Romney win.  Letting the Wall Street foxes back in the henhouse for entities that have systemic risk is scary.  But what about the pending crowdfunding regulations?  Would piling excessive costs and regulations on Title III crowdfunding transactions be the type of abusive regulations that Romney has been talking about killing?  One might guess that the regulations that come out would have a lighter regulatory touch.  Would Romney see investment crowdfunding as competitive to his finance cronies and seek to undermine it?  Who knows?

The more likely issue is that a wholesale change at the SEC after a Romney win would seem to put in some period of transition on top of an already backlogged agency.  It is impossible to predict how any of this shakes out, but it is yet another reason to speculate about just how far off investment crowdfunding really is in the U.S.

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