Dichotomous

 By Steve Cinelli, CrowdFundBeat Contributing Editor. Let’s be straight.  The JOBS Act, while intended for great things, many of which still to be achieved, has been challenged in one particular area – Title III Crowdfunding.  While Mr. President signed the Act some time ago, the implementation of Title III was passed on to the Securities and Exchange Commission (SEC) for review and institution.  For those unfamiliar with Title III, its simple agenda was to allow every day investors, not the accredited sort, to participate in investing in privately held companies.  The SEC, after a year or so, authored a 585 page tome as to how such every day investors can participate, subjecting offering companies to some fairly extensive and expensive processes and disclosures, and limiting the investment activities of such investors based on their individual resources, rendering the Title III proposition largely untenable.

t123

While admirable, the Big Brother approach spanks of inconsistency and dismissal of what crowdfunding aspires to accomplish in light of other existing allowances.  We can bemuse the discussion with why no one is looking out for those spending one’s life savings on lottery tickets or the crap table in Vegas.  Or possibly the vacation of all vacations.   Is there a separate financial conscious governing such crowdfunding activity?

 

True, this is a heavily regulated, legislated, fiduciary minded environment, that of the world of investing in securities.   A consequence of the Crash of 1929, the Roosevelt Administration formed the SEC to regulate the securities industry with three major pieces of legislations, commonly referred to as the Securities Act of 1933 (governing disclosures), the Securities’ Exchange Act of 1934 (governing secondary trading), and the 1935 Public Utility Holding Act (governing utility control).  About 80 years later, these Acts still create the fabric of our securities industry, and serve as the foundation of many other international markets.  As with our Constitutional documents, the spirit and crafting of these Acts are admirable, conscientious and sound, drafted with the best of intentions.  But there needs to be consistency, which I submit, is lacking.

 

While most are familiar with the major public exchanges, say the New York Stock Exchange and NASDAQ, where thousand of companies float their shares and active and transparent trading is facilitated, in compliance with the Acts above, there are also other platforms for investing and trading securities accessible to all investors, namely the Over the Counter markets, which beat to their own drummer.   Companies that trade, or rather quoted on the OTC markets, do not need to meet the minimum requirements or file with the SEC, yet they are commonly accessible to all investors, regardless of financial acumen or capacity of such investor.

 

I have had recent experience with what are referred to as the Pink Sheets or Grey Sheets, and have marveled on how prices rise and fall within minutes based on press releases, innuendo, and communal support or lack thereof.  It simply is fascinating theatre how this market seems anything but an investment market, but rather a trading environment where an investor’s hold may be calculated in minutes not months or years, and price swings are measured like acceleration rates 0 to 60 in seconds.  And as these companies aren’t required to file with the SEC, the lack information or disclosure seems antithetical to the desires to govern the crowdfunding phenomena.   A dichotomy of regulation?

 

As a supporter of capital formation for emerging companies, the crowd environment and those that endorse it, proffer disclosures in many ways, engaging the investor community, hopefully enhancing and improving the investor experience.  True, many of the companies funded through crowd platforms may not succeed and losses may be severe.  But the basic tenet of the SEC in its oversight of the securities environ is to advocate for disclosure for informed investment decision making, which the CF industry is advocating, and that investment wins and losses shall be gauged by the execution and performance of the underlying company, rather than having investment capital evaporate in a trading environment based on hearsay, speculation and negligible hard data.    So I ask, what’s the issue with a set of disclosure standards that are reasonably supplied and cost effective to enable the next generation of companies to advance under a crowd funding platform and acknowledged by the SEC, while the same Commission allows suspect companies and any investor to speculate any amount of funds with literally no disclosures?   Again, a bit of inconsistency here.

As a footnote, did you know that the formation of the SEC was on June 6, 1934, exactly ten years before D-Day, June 6, 1944?  Coincidence?  Well maybe eight decades later, June 2014, maybe some new history will be written to advance a more consistent capital formation protocol for small companies.

Steven Cinelli

Founder | CEO at PRIMARQ

CFB Exclusive Interview: Crowdfunding Experts with Steve Cinelli

 

Tags: , , , ,

Leave a Reply

Your email address will not be published.

HEADLINE NEWS

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news [...]

NPRAfter Outcry, Crowdfunding Site Patreon Backs Off Plan To Raise ...NPRThe popular crowdfunding service Patreon has backed off plans to change its payment structure, after widespread, vocal and passionate opposition from creators and their fans. Last week, the site announced it woul [...]

EntrepreneurWhy Some Small Business Owners Are Turning to Crowdfunding to Save Their CompanyEntrepreneurMany owners of beloved local businesses, especially in pricier cities, have been forced to swallow their pride and appeal to their customers in times of crisis -- a process streamli [...]

TechCrunchHow hate speech crowdfunding outfit Hatreon crept back online ...TechCrunchIf you want to make a living creating white supremacist content, you're probably not going to do it via sites like Kickstarter and Patreon, which prohibit hate speech. Fortunately there's Ha [...]

Crowdfunding bid to cut car cover for millennialsThe TimesAn insurance start-up that claims it can reduce premiums for millennials will launch a £15m initial coin offering (ICO) next month in another sign of the growing frenzy over digital currencies. InsurePal will use the funds rais [...]

ForbesCrowdfunding Do's And Dont's From iFundWomen's Karen CahnForbesDuring our conversation, she was transparent in sharing that her first software company, VProud, failed because she “did everything backwards” and spent too much time trying to perfect the product. “Pe [...]

CoinDeskKickstarter ICO? Don't Count On It Says Crowdfunding Leader ...CoinDeskThe company most widely associated with crowdfunding, Brooklyn-based Kickstarter, has no plans to get into the initial coin offering (ICO) business. Coming in response to the news yesterday that compet [...]

TechCrunchFormer Gawker employees are crowdfunding an effort to buy Gawker.comTechCrunchWhile Univision acquired most of Gawker Media's sites last year (and renamed them as the Gizmodo Media Group), the deal didn't include Gawker itself. In fact, BuzzFeed reported last month [...]

Crowdfunding For French CastlesNPRYou too can own a French chateau, in part, anyway. Romain Delaume, CEO of Dartagnans, tells NPR's Scott Simon about a crowdfunding effort underway to preserve La Mothe-Chandeniers. SCOTT SIMON, HOST: What if I told you that for about $60, you cou [...]

CryptoCoinsNewsCrowdfunding Giant Indiegogo Looks to Make ICOs MainstreamCryptoCoinsNewsCrowdfunding platform Indiegogo has a plan to help initial coin offerings (ICOs) break into the mainstream, even as the U.S. Securities and Exchange Commission (SEC) is ramping up its oversight of [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |