Crowdinvesting–Does It Have A Future?

In the last few weeks I found crowd investing. The SEC got there before me in its case dealing with an attempt to buy a beer company with investments being made on a website.   I’m not sure why I have been so taken by this concept.  Most of my career has been spent working in the capital raising world as a securities attorney.  I have worked with the regulations and with the business people who advise on the best way to raise capital – big capital – not $1 million.

Perhaps my interest arises from the very source that has created this trend – the economy.

Well Congress is also interested and there is a hearing today and another next Wednesday.

There is a group that has started a website Startupexemption.com.  You can also follow them on Twitter  @crowd investing.  Their website is very simple, it gives you two options to sign a petition requesting that  the SEC create an exemption for small businesses (i.e. l ess than $5 million in revenue for the last three years) to raise money over the Internet.

There are a number of legal and regulatory hurdles that need to be overcome in order for crowd investing to be legal.  Startupexemption.com has dealt with these issues. What is not clear is how effective is their solution.    Over the next few weeks I’m going to address a few of the potential issues raised by this “startup exemption”. I will try not to sound too much like SEC Chair Mary Shapiro who said:

the U.S. capital markets are “a critical source of funding for emerging companies and smaller public companies.” She stressed it is important to balance the facilitation of capital formation with investor protection.

But there is a need protect all of the parties involved.

As always your comments are encouraged.

©2011 Sharon M. Davison, you may share this article with attribution to the author.

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