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Success of crowdfunding depends on SEC regulations

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Success of crowdfunding depends on SEC regulations - Phoenix Business Journal

http://www.bizjournals.com/phoenix/news/2012/06/29/success-of-crowdfunding-depends-on-sec...

From the Phoenix Business Journal :http://www.bizjournals.com/phoenix/news/2012/06/29/success-of-crowdfunding-depends-on-sec.html

Phoenix Business Journal by Kent Hoover, Washington Bureau Chief Date: Thursday, June 28, 2012, 9:00pm MST Related: Health Care

Kent Hoover Washington Bureau Chief- Phoenix Business Journal Crowdfunding won’t work for small businesses unless the U.S. Securities and Exchange Commission limits the burdens imposed on companies that use this new method of raising capital. That’s what crowdfunding experts told members of the House Oversight and Government Reform Committee during a hearing on the JOBS Act, the new law that aims to make it easier for small businesses to raise capital. Once the SEC issues regulations governing crowdfunding, small businesses will be able to use Internet intermediaries to raise up to $1 million in small investments from lots of people. If the SEC imposes too many restrictions on crowdfunding, this new method of raising capital could be “strangled in its cradle,” said Brian Cartwright, a former SEC general counsel who now is scholar in residence at the Marshall School of Business at the University of Southern California and senior adviser to Patomak Global Partners, a financial services consulting firm. Here are three things the SEC could do, according to hearing witnesses, to make sure crowdfunding works: • Increase the threshold for audited financial statements from issuers to offerings of $1 million, instead of the $500,000 called for in

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6/29/2012 12:16 PM

Success of crowdfunding depends on SEC regulations - Phoenix Business Journal

http://www.bizjournals.com/phoenix/news/2012/06/29/success-of-crowdfunding-depends-on-sec...

the law. Since startups don’t have much operational history, audited financial statements don’t provide any more useful information than unaudited financial statements do, said Alon Hillel-Tuch, co-founder and chief financial officer of the RocketHub crowdfunding website. But audited financial statements can cost a startup tens of thousands of dollars -- an expense that could make crowdfunding cost-prohibitive. • If the SEC thinks investors need additional protections, focus on intermediaries rather than entrepreneurs. Brokers and Internet portals “can be used as gatekeepers to keep out the bad actors,” said C. Steven Bradford, a law professor at the University of Nebraska. As “repeat players,” they also will be in the position to “spread any regulatory costs over a large number of offerings,” he said. The small businesses that are likely to use crowdfunding, on the other hand, can’t afford “sophisticated securities counsel to guide them through complex regulation,” he said. • Allow crowdfunding portals to be flexible on the fees they charge issuers. As crowdfunding enters the world of equity investments, the SEC should preserve the fee structure already used by many crowdfunding sites, which minimizes up-front expenses for small businesses. “Platforms should be able to charge fees on successful projects, while not imposing costs on projects that do not attract funding,” Hillel-Tuch said. “This fee structure will allow more small companies to use crowdfunding, while reducing their risk if they are unable to attract financing.” Most patents at US research universities list foreigners as inventors More than 76 percent of the patents awarded to the nation’s top 10 research universities last year had foreign-born scientists listed among the inventors. That’s according to the Partnership for a New American Economy, which analyzed 1,500 patents awarded in 2011 to the top 10 patent-producing universities in the U.S. The organization, which is composed of mayors and business leaders, contends this finding demonstrates the need to reform immigration policies to allow more of these foreign-born inventors to remain in the U.S. Many of these inventors may end up leaving the country under current policies. The study found 54 percent of the patents studied included foreign-born inventors who were students, post-doctoral researchers, or staff researchers who were not professors. These foreign researchers are the “most likely to face major hurdles obtaining the visas needed to settle permanently in the United States,” according to the partnership. University research is important because it helps the U.S. stay ahead in the fields of science, technology, engineering and mathematics (STEM). Universities receive one in six of all patents for molecular biology and microbiology, , and academic research institutions own more than one-third of the patents in genetics. The partnership contends Congress should help the U.S. keep its research edge by passing legislation to: • Grant permanent residency -- green cards -- to foreign students who earn graduate degrees in STEM fields;

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Success of crowdfunding depends on SEC regulations - Phoenix Business Journal

http://www.bizjournals.com/phoenix/news/2012/06/29/success-of-crowdfunding-depends-on-sec...

• Create a Startup Visa for foreign-born entrepreneurs who want to start companies in the U.S.; and • Remove or at least raise the current cap of 65,000 H-1B visas, which are awarded to highly skilled foreigners who work in the U.S. These recommendations were seconded in a letter sent to the White House and Congress this week by more than 80 university presidents. “If U.S. political leaders don’t reform the country’s broken immigration system soon, they risk jeopardizing one of the country’s biggest assets -- our ability to leverage our pre-eminent universities to attract talented foreigners and make them part of the great American success story,” the partnership’s report concludes. Blank to run Commerce Department now that Bryson has resigned U.S. Commerce Secretary John Bryson resigned less than two weeks after he was cited for hit-and-run following back-to-back traffic accidents in California. “I have concluded that the seizure I suffered on June 9th could be a distraction from my performance as secretary and that our country would be better served by a change in leadership of the department,” Bryson wrote to President Barack Obama. Acting Secretary Rebecca Blank, who headed the Commerce Department while Bryson was on medical leave, will continue to run the agency now that he has resigned. Odds are Obama won’t nominate a new commerce secretary before the election; the confirmation process would turn into a debate over the president’s economic policies, and it probably would be hard to find a high-profile candidate who’d be willing to take a job that would last only a few months if Obama isn’t re-elected. In a statement thanking Bryson for his service, Obama said he is confident Blank “will serve the American people well.” The president said Bryson “fought tirelessly for our nation’s businesses and workers, helping to bolster our exports and promote American manufacturing and products at home and abroad.” Bryson, former CEO of California utility Edison International, continues to serve on Obama’s Export Council.

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Summary
Crowdfunding won’t work for small businesses unless the U.S. Securities and Exchange Commission limits the burdens imposed on companies that use this new method of raising capital.That’s what crowdfunding experts told members of the House Oversight and Government Reform Committee during a hearing on the JOBS Act, the new law that aims to make it easier for small businesses to raise capital. Once the SEC issues regulations governing crowdfunding, small businesses will be able to use Internet intermediaries to raise up to $1 million in small investments from lots of people.

Description
Here are three things the SEC could do, according to hearing witnesses, to make sure crowdfunding works:

• Increase the threshold for audited financial statements from issuers to offerings of $1 million, instead of the $500,000 called for in the law.

• If the SEC thinks investors need additional protections, focus on intermediaries rather than entrepreneurs.

• Allow crowdfunding portals to be flexible on the fees they charge issuers. As crowdfunding enters the world of equity investments, the SEC should preserve the fee structure already used by many crowdfunding sites, which minimizes up-front expenses for small businesses.

Tags: American Jobs Act, Crowdfunding, Crowdsource, Crowdsourcing, Equity Crowdfunding, President Obama

Posted by Luis Enrique Morales

Jun 29, 2012 04:27 am GMT Viewed 834 times

Author: Kent Hoover Source

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