Crowdfunding Delay from the SEC

crowdfunding-delaysBusiness owners and investors have been anxiously waiting for the SEC to finalize their crowdfunding regulations since the JOBS Act was passed in 2012.  It has been two years and we are still waiting.  In 2013, the SEC issued their proposed rules and we have reviewed them extensively on this blog.  They covered everything from who can be involved, how much money can be raised, the amount individual investors can contribute and more.  In total, the document is over 500 pages long.  Since issuing the proposal, the SEC has been accepting comments from anyone related to the industry in order to get feedback on which part of the proposed rules to keep and which ones need adjusting.

The Proposed Rules Have Been Scrapped

Last week the SEC’s crowdfunding advisory board, a panel of 21 people, voted unanimously that they proposed rules do not meet the spirit or guidelines outlined in the JOBS Act.  In other words, they need to be scrapped and the SEC must start again.  Considering it took a year and a half to issue the first set of proposed rules this is not good news for the crowdfunding community.

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TABB Says SEC Rules Point to Institutionalization of Crowdfunding

tabbNEW YORK & LONDON — Based on the SEC’s proposed crowdfunding Title II and Title III rules, equity crowdfunding will soon enter the United States, providing a new option for small businesses to raise financing, bringing with it the promise of democratizing access to capital by giving power to the crowd.

But in new research, “US Crowdfunding: The Making of a Market,” co-written by CEO Larry Tabb and contributing analyst Deepali Nigam, TABB Group says the jury is still out on the final rules’ impact:

Will they have the power to create a healthy new marketplace where US small businesses will be able to successfully gain access to funding?
Will crowdfunding expose innocent, small-time investors to fraudsters and scam artists?
Will the rules prove too rigid, stifling this industry before it even starts?
Will crowdfunding be too expensive for US businesses?
Who will gain advantages, broker/dealers or funding portals, with barriers-to-entry costs for one, potential liability exposure for the other, among other issues?
Assuming a conservative 5% growth rate per year, TABB believes angel investing will grow to at least $28.5 billion by 2016, but will angel investing rules be more impactful to investors or issuers?
As new platforms targeting accredited investors emerge, how easy will it be for high net worth individuals to meet their investment strategy requirements from as little as $1,000 to $37,000 per investment?

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