| Two years have almost passed since the SEC was supposed to put in place a set of crowdfunding rules as indicated by the JOBS Act which was signed earlier in 2012. The US Congress, in fact, had put December 2012 as a deadline for the SEC to approve and release crowdfunding rules. Since then, the SEC published a drafted legal framework for this new financial tool last year and, after having received several comments from the public, went silent again. |
But why the SEC is taking so long? Put in simple words, one of the main reasons is probably that it is not convinced by the idea of opening, with a too light regulation, securities crowdfunding to a “crowd” of non investment-savvy citizens, because it considers it a risky activity and wants to find the best way possible to guarantee the maximum protection to retail investors,on the one hand, without losing the potential of crowdfunding as an SME finance source on the other hand.
However, if on the one side the SEC is taking its time to create and approve a set of rules for securities crowdfunding, on the other side, the growing US crowdfunding ecosystem can’t wait to see some action. And this is why the states took action to fill in the void left by the SEC’s cautiousness, creating the so called “intrastate crowdfunding” movement. Thirteen states have so far adopted a legislation for crowdfunding, all of them with the same objective of fostering access to finance for SMEs, but with different rules and requirements depending on the state.
Does intrastate crowdfunding actually work? Difficult to tell exactly, since many states adopted their set of rules only very recently. However, some securities crowdfunding portals have already launched their activities exploiting one or the other state regulations and even closing some deals. Was there any fraud? No, until now. Which does not mean that there is no risk of frauds, but only that it is a good start. Also looking outside the US, in Europe, for example, where different countries have opened securities crowdfunding also to retail investors, there is no big case of fraud. Implementing a good set of rules at national level may help fostering transparency in a mechanism like crowdfunding which is already transparent by nature. If the different intrastate rules may be seen from a federal perspective as an experiment to test what actually works fine to help establish a flourishing and transparent crowdfunding market and what actually does not, the SEC may be learning a lot from these initiatives for its future regulation.
References
Davidoff Solmon, S. (2014). S.E.C.’s Delay on Crowdfunding May Just Save It. NY Times.
Image credit to: Securities And Exchange Commission http://bit.ly/1uYLKbz
However, if on the one side the SEC is taking its time to create and approve a set of rules for securities crowdfunding, on the other side, the growing US crowdfunding ecosystem can’t wait to see some action. And this is why the states took action to fill in the void left by the SEC’s cautiousness, creating the so called “intrastate crowdfunding” movement. Thirteen states have so far adopted a legislation for crowdfunding, all of them with the same objective of fostering access to finance for SMEs, but with different rules and requirements depending on the state.
Does intrastate crowdfunding actually work? Difficult to tell exactly, since many states adopted their set of rules only very recently. However, some securities crowdfunding portals have already launched their activities exploiting one or the other state regulations and even closing some deals. Was there any fraud? No, until now. Which does not mean that there is no risk of frauds, but only that it is a good start. Also looking outside the US, in Europe, for example, where different countries have opened securities crowdfunding also to retail investors, there is no big case of fraud. Implementing a good set of rules at national level may help fostering transparency in a mechanism like crowdfunding which is already transparent by nature. If the different intrastate rules may be seen from a federal perspective as an experiment to test what actually works fine to help establish a flourishing and transparent crowdfunding market and what actually does not, the SEC may be learning a lot from these initiatives for its future regulation.
References
Davidoff Solmon, S. (2014). S.E.C.’s Delay on Crowdfunding May Just Save It. NY Times.
Image credit to: Securities And Exchange Commission http://bit.ly/1uYLKbz
| About the author - Irene Tordera Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives. During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem. |
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