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SEC Has Yet to Release Final Crowdfunding Rules

Date: May 23, 2014

Concerns about investor protections remain

In a piece for the New York Times’ “You’re The Boss” small business blog, Robb Mandelbaum writes that the SEC’s review period for its proposed rules on equity crowdfunding ended more than three months ago, but there are still no final rules. The rules have already been delayed; they were originally supposed to be in place at the start of 2013. The rules would allow the sale of equity in start-ups and small businesses to average Americans.

Part of the delay may be caused by concern that the SEC’s proposed rules open investors to too much risk, given the high failure rate of new businesses. For example, Oregon Sen. Jeff Merkley, an author of the original legislation that put the SEC on the issue, said of crowdfunding, “For small businesses to utilize it, the system must be both simple and easy. Yet investors must also have confidence in what crowdfunding provides, or else they will not provide the capital into the market.”  NFIB's main concern is not that the SEC's proposed rules are released quickly, but that they are right for small business.

What It Means for Small Business:

The delay in the SEC rules reflects the inherent tension in this new form of potential financing. While some see it as a welcome harnessing of new digital capabilities to create a new stream of financing, others view it as a riskier platform for investment than traditional methods. Given the short history of crowdfunding, there isn’t enough evidence yet to definitively settle that debate.

Further Reading:

In a blog for the New York Times, Robb Mandelbaum covers the issue.

Read more from NFIB on How to Kickstart Your Business with Kickstarter.

This news article is intended to keep small business owners apprised of current events that may affect them. It does not necessarily reflect NFIB’s policy position on such issues.

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