2,801 crowdsourcing and crowdfunding sites
At its annual "Government-Business Forum on Small Business Capital Formation," today the U.S. Securities and Exchange commissioners and invited panelists discussed progress, key issues and concerns with implementation of the JOBS Act, including Title III, the provision to legalize crowdfunding for equity.
Today's forum began with opening remarks from SEC commissioners followed by a panel discussion on the JOBS act. In her greeting, SEC chairwoman Mary Schapiro noted that progress was being made on rulemaking for all aspects of the JOBS Act, but offered no specific timeframes for completion or more specific information on how much headway has been made in the process of drafting regulations for Title III.
Schapiro noted that for the JOBS Act, the SEC duplicated the process it had already created for drafting regs for the massive Dodd-Frank financial reforms. The SEC has already proposed new rules and solicited public comment for the part of the law that lifts the ban on general solicitation and advertising for certain types of securities.
Schapiro stressed the SEC's goal of drafting rules that "balance investor protection" and "enable capital formation."
Commissioner Elisse Walter used her time at the beginning of the meeting to speak supportively of lifting the ban on general solicitation and advertising, calling the notion of having to balance protection with capital creation a "false choice."
"We should not block these changes because we are afraid that harm will result," said Walter. "It is the job of regulators to enable (capital creation)... while protecting against downside risks."
During the first panel discussion on JOBS act implementation, Sara Hanks, CEO of CrowdCheck and an attorney who has worked for both the SEC and the Congressional Oversight Panel for TARP, gave a general overview of aspects of the JOBS Act that the SEC must work to address. The issues included everything from monitoring investment limits and investor education to the need for background checks and bad actor provisions.
Panelist William Beatty, Director of Securities at Washington State's Department of Financial Institutions and a member of the North American Securities Administrators Association (NASAA), which has been the most vocal critic of the Title III crowdfunding provisions, echoed the need for a "bad actor disqualification."
Beatty said he worries about the likelihood of "a huge number of unsophisticated (crowdfunding) investors coupled with probably not too much regulatory oversight."
He added that what organization is designated to serve as the self-regulatory organization for the industry, or SRO, is also a big issue.
"It looks like it will be FINRA... Initially there was some concern that it might be a new and less robust SRO."
The SEC forum continues into the afternoon, when participants will split into break-out sessions, including one specific to crowdfunding, with the goal of drafting recommendations for the commission to review and take into consideration as it continues its rulemaking work.
The JOBS Act includes a deadline for rulemaking for crowdfunding that expires in January, but so far the SEC has failed to meet most of its deadlines outlined in the law.