Sec Chair Says Crowdfunding Coming “Soon”, But When Is That?

American Jobs Act

American Jobs Act

In a recent speech at the annual “SEC speaks” event, current Securities and Exchange Commission chair Elisse Walter placed the word “crowdfunding” immediately after the word “soon.”

Well, that seems like progress.

Of course, I could just be engaging in the time-honored tradition of over-parsing every word uttered by a beltway insider in search of clues about what’s going on inside the government. Here’s the complete sentence:
“Soon, crowdfunding will bring the potential for a broader range of investors to provide private capital, although their investments will be and should be limited.”

As most people that have ever visited this site — or listened to our recent podcast on the status of Title II and Title III of the JOBS act (those are the parts that impact equity crowdfunding) recorded less than 48 hours before Walter’s talk — can attest, the implementation of the law is a little behind schedule.

The frustrating part about the JOBS Act timeline is the lack of someone to point a finger at (OK, so maybe Mary Schapiro slowed things down a bit, but she’s out of the picture now). The wheels of Washington bureaucracy just simply are not designed to turn very quickly, especially when you’re trying to create a new class of security just a few years after some (completely different) little-understood financial instruments helped take down the global economy.

But the SEC is now providing a light at the end of the tunnel.

“We are busily working on getting a recommendation to the commission,” Lona Nallengara, acting director of the agency’s Division of Corporation Finance told the crowd at the event, according to the Wall Street Journal. He called it a “top priority” for Walter.

There is a caveat, of course, in the form of new types of investor limits and disclosure requirements. None of this is exactly a surprise, but given the vocal concerns from critics in recent months over the potential for crowdfunding fraud, it will be interesting to see exactly how the SEC proposes to strike a balance between creating investor protections while also maintaining an efficient market. That basic and predictable theme has permeated almost every sentence spoken or written by any representative of the SEC in the last year.

So then, back to the parsing.

In Washington speak, phrases like “busily working,” “a top priority” and “as soon as possible” are very positive signs, although perhaps not as positive as they sound.

That’s because “soon” in Washington is a very relative concept. There are still recommendations to be made, public comment periods to be announced, the impending confirmation of a new SEC chair and whatever unforeseen crises that lurk just around the corner to account for.

So, practically speaking, it’s pretty much impossible to imagine that we would have a crowdfunding framework in place before Q3. That puts a late summer / fall start in the realm of our current “best case scenario.”

Now, time to self-parse my own words.

The term “best case scenario” when used by a journalist referring to the federal bureacracy is probably better interpreted as “slim to none.”

That means Q4 is the period serious betting people might begin to look to. And Q1 2014 and beyond is when cynical people might bet on.

One last parse.

When talking about “cynical people” in the context of current day Washington, the prevailing wisdom of the crowd tells us it is safe to substitute “realistic” for “cynical.” So then, “realistically” we’re talking no crowdfunding this year.

If you’ve managed to follow along this far, the clear — or clearly over-parsed — conclusion is that there is a light at the end of the tunnel for equity crowdfunding, but it just might be one long damn tunnel.

Source: – Eric Mack


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