By Kent Oyler
Stand back; this is going to get big. The hysterics around equity crowdfunding (ECF), I mean.
The SEC may have taken its sweet time drafting up the proposed rules for Title III of the JOBS Act – 560 days to be exact which coincidentally (?) happens to be the exact gestation period for two babies – but the proposed rules are now out, having been released Wednesday, Oct. 23, and it’s obvious that the coming 90-day public comment period is going to be noisy.
A quick review of the online news reports and related reader comments show panic-stricken cynics initially outnumbering fans. But that should change as thoughtful analysis and commentary emerge and the glum disparagers passage back to Obamacare.
One might think that the lottery had just been legalized. Oh wait, lotteries are legal and somehow haven’t brought down the nation. And neither will allowing normal folks to make their own decisions to invest sensible amounts in private corporations.
ECF is a successful reality in a host of other countries, and rewards-based crowdfunding platforms like Kickstarter have been a part of the domestic landscape for years. Fraud is a rarity, and there are now thousands of success stories.
But, fear not citizens. In upholding its duty to protect the vast unwashed from themselves, the SEC has birthed a whopper reg-baby, weighing in at 600 pages. And if that’s not enough, FINRA will surely layer on additional protective ink. Just pray they don’t smother this newborn opportunity.
Surely the devil resides in the fine print and sheer size of the regs, but a cursory glance over the SEC’s proposal didn’t surface any big surprises. Still looks like someday soon small companies will be able to raise up to $1 million a year from the 99 percenters through a well-regulated portal system.
Companies will have to make the normal disclosures and pay for an audit if they roll over $500,000 on their raise. Joe Six-pack will be able to invest up to $5,000 a year while six-figure Suzy can drop in up to $100,000, all without being a millionaire Accredited Investor.
Pretty much what we’ve been hearing for the past year. But now it’s really happening.
So sit back and enjoy the show. Me-thinks that when the fear mongering subsides and the ECF rulemaking games conclude, the end result will be one of the most sweeping changes in the financial sector since Al Gore invented online bill-pay.
Keep track of what’s happening at www.commonwealthcrowdfunding.com
Kent Oyler is Managing Director of OPM Financial (www.opmfinancial.com) and chair of CommonWealth Crowdfunding, a grassroots initiative designed to help prepare entrepreneurs and investors to take advantage of all forms of crowdfunding.