Blue Sky, Regulators, Crowdfunding and “The Crowd”

By  Founder Raiseworth, CrowdFundBeat Sr. Guest Editor,

What the crowdfunding industry has taught us worldwide is that “the crowd” will “out” a bad actor long before any of the regulators do.

Regulators came out of the USA “blue sky” laws written state by state between 1911 and 1931. In these times there was no internet, little communication from town to town, regulators used broad laws to catch bad actors when they needed to, and when they found them. They may have got “tip offs” but as can be seen in this article the regulator often chooses their target.

AAEAAQAAAAAAAAfGAAAAJGM1MmYzYzBkLWE2NzMtNGI1MC1hMjk1LWYwYTA2M2YwYThjNA

 

 

 

 

 

It was a different world then. (1931)

  1.  Regulators were on the road or the local office as were the transactions
  2.  Local Regulations were implemented state by state
  3.  Regulator only got interested when people had already lost their money
  4.  It was difficult for citizens to voice concern as a group or to be involved
  5.  Transaction volume and complexity was relatively low

Now there are millions of transactions, many of them complex,  and a myriad of international players

  1.  Regulator resources are limited
  2.  Differing International Regulations by multiple regulators
  3.  “The Crowd” is often involved long before an investment offering manifests
  4.  Crowd can easily be included in the assessment or “outing” of issuers and their offering and publishing it
  5.  Transaction volume and complexity is high

In this environment,  building new “regulatory regimes” without basing them on the views and input of the millions of people involved in these transactions is neglecting reality. Campaigns can be closed down before the money leaves escrow accounts because the crowd simply communicated or shared that this entity or these people are not the ones you should be doing business with. This ability was not around in 1931. Back then the money was long gone before the regulator actually caught up with them.

Today’s currency is trust.

Todays asset is loyalty.

The need for transparency has huge traction.

Businesses and individuals disobeying this do not survive

All participants know that their deeds, good or bad, are public via the internet for the rest of their life and often that is motivation enough to curtail misrepresentation etc.  However this coupled with an ever watchful crowd and and social media channels  to gather and share views means that the government and their delegated regulatory entity would be far more effective if they empowered this army of vested interests and went lighter on the all encompassing rules like the soon to be implemented crowdfunding regulations.

Raising the bar to limit transactions due to deal size or investment amount is one way of running a regulatory regime.

A better way is to recognise that it is a different world now moving from centralized to decentralised transactions where the people that really know what is going on are the very people that know the people and stories behind the deals.

These are not intermediaries.

They are people doing their homework before recommending or investing. The crowd. They will catch a “bad actor” long before the regulator will even if the regulator keeps doing what they are doing on a larger scale with a bigger budget.

source:

http://www.paulniederer.com/

 

Tags: , , , , , , , , , ,

HEADLINE NEWS

When survival is a popularity contest: the heartbreak of crowdfunding healthcare  The GuardianA growing number of Britons are turning to online fundraising for essential treatment in a desperate, 'Dickensian' attempt to get around NHS shortfalls. But does ... [...]

French Startup BeeLife Is Aiming To Make Crowdfunding History  ForbesFrench startup BeeLife is hitting the market with its revolutionary bee hive, which it hopes will engender a new generation of beekeepers, rebuild the bee ... [...]

Crowdfunding firm Prodigy is broke, former exec claims in defamation lawsuit  The Real DealA former exec is suing real-estate crowdfunding platform Prodigy Network, alleging that the company's "cash difficulties" are the fault of CEO Rodrigo Niño. [...]

Schafer: VivaQuant makes intriguing bet on equity crowdfunding  Star TribuneMaybe no one really said equity crowdfunding would one day be bigger than going public on Nasdaq, but whatever the expectation when equity crowdfunding ... [...]

New German Crowdfunding Regulation: Major Enhancements, A Few Regrets  Crowdfund InsiderThe German Crowdfunding Association, the federal industry association which represents 85% of the German crowd investment market, welcomed last week ... [...]

Malaysia Turns to Property Crowdfunding as Banks Reject Loan Applications  BloombergMalaysia's government is turning to the wealth of the masses, instead of reticent banks, to help solve a $4.8 billion property overhang. [...]

FTC sues 'iBackPack' founder for deceiving crowdfunding backers  EngadgetAfter a months-long investigation into the practices of the crowdfunding campaign for iBackPack, the Federal Trade Commission announced today that it will sue ... [...]

John Zorn's Rebound From PledgeMusic's Implosion  NPRJohn Zorn, the prolific and brilliantly iconoclastic composer, realized a dream of sorts last year when he released The Book Beriah — a box set of 11 new albums ... [...]

This crowdfunding firm just picked the carcass of RealtyShares  The Real DealThe remnants of RealtyShares — the now-defunct crowdfunding platform — have been scooped up by another real estate firm. New York-based iintoo acquired ... [...]

Build crowdfunding momentum by first building trust  Knoxville News SentinelThese small business owners learned firsthand how to succeed with crowdfunding. Their lessons can give your own crowdfunding a boost. [...]

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 |