SEC Approves Equity Crowdfunding from Unaccredited Investors

http://www.sec.gov/news/pressrelease/2015-49.html#.VRSPA_nF8qx

by akg_67 • 11 years ago

249 121 11 years ago

capkutay• 11 years ago

This must be good news for FundersClub and crowdfunding startups like Kickstarter (maybe good for P2P lending companies too).

It may not be good for people who are unknowingly bad at evaluating companies. Seed stage investment is extremely risky for the common investor.

meric• 11 years ago

A limitation on the amount of securities non-accredited investors can purchase in a Tier 2 offering of no more than 10 percent of the greater of the investor’s annual income or net worth.

I think this would contain the risk.

otoburb2• 11 years ago

This contains the risk somewhat, except I think the limitation for non-accredited investors only applies for each Tier 2 offering, and doesn't act as an aggregate limitation on a per year basis.

arikrak2• 11 years ago

I don't think Kickstarter is planning on offering equity. Other sites will, and they'll serve as a screening service so users know which startups are worthy.

aikah2• 11 years ago

I don't think Kickstarter is planning on offering equity.

Well, if "crowdinvesting" is a success , as I think it will be ,they may pivot

It makes more sense to invest in a business than just handing out free money with no oversight , the later is what Kickstarter is. I would even say the former is less risky.

rdlecler15• 11 years ago

Not good news for FC. See my post above.

carbocation• 11 years ago

Additional Tier 2 Requirements:
A limitation on the amount of securities non-accredited investors can purchase in a Tier 2 offering of no more than 10 percent of the greater of the investor’s annual income or net worth.

Do these modest limitations on non-accredited investors only apply to Tier 2 offerings? I.e., can a non-accredited investor put 100% of net worth into a Tier 1 offering?

marcusestes• 11 years ago

Tier 1 offerings are available to accredited investors only. Here's a link to the final ruling: https://www.sec.gov/rules/final/2015/33-9741.pdf

otoburb2• 11 years ago

I originally thought the same, but I couldn't find in the final ruling where it states that Tier 1 offerings are restricted only to accredited investors.

Also, I saw a SeedInvest summary article on the proposed rules and it stated: "Anyone can invest: Not limited to just “accredited investors” – your friends and family can invest. Tier 2 investors will, however, be subject to investment limits described below."[1]

A law firm called Morrison Foerster also has a nice summary table on page 9 of their Regulation A+ client alert[2].

[1] http://www.seedinvest.com/blog/regulation-a-equity-crowdfund...

[2] http://www.mofo.com/~/media/Files/ClientAlert/2015/03/150326...

arikrak2• 11 years ago

I submitted this earlier today, but without changing the title. I guess HN allows resubmissions if there's meaningless text after the URL?

https://news.ycombinator.com/item?id=9269737

sanswork• 11 years ago

It does and it should make you happy a story you found interesting enough to submit is getting enough traction now for discussion.

waterlesscloud2• 11 years ago

At the same time, it's useful for the site as a whole if people who submit interesting stories are rewarded with karma and not downvoted.

eknight15• 11 years ago

I submitted yesterday, it's all in the title :)

https://news.ycombinator.com/item?id=9264355

Everhusk• 11 years ago

The exemption would be limited to companies organized in and with their principal place of business in the United States or Canada

Any thoughts on why they included Canada?

ChuckMcM3• 11 years ago

Sigh, I remain concerned that if you want to light off a bubble in Tech this is the way to do it. Time will tell of course.

The reason I am concerned is that the last tech bubble was fueled by retail investors who got to buy stock in companies that IPO'd (but shouldn't have). A lot of people invested their savings into companies they were not prepared to evaluate reasonably. Relying instead on "trusted advisors" who often were financially invested in the stocks they advised going up.

No doubt there are some really honest and worthwhile crowd investing companies, just like there were honest and worthwhile financial advisers in the 90's and honest and worthwhile Mortgage brokers in the naughts. But their existence will not deter nor mitigate their dishonest counterparts who will ruthlessly, and with all the tools available to them (legal and otherwise), separate people from their money under the guise of "getting in on the ground floor of the next Google or Facebook." I want with all my being to be wrong about this, and would love for people five years from now to be able to see this comment and say "Gee what a cynic, he really didn't get it did he?" But that future is not the one I expect.

neovi2• 11 years ago

There's a small chance something of the sort could happen, but there are some nice limitations included.

In the 90s, the companies were issuing to be publicly traded; which means retail investors were free to put their whole income into a stock if they wanted to. Here they're only allowed a percentage of their income depending on their income bracket (over $100,000k or under). There's also a 30% cap to sell, which is far better than selling the whole entire fridge.

wsidell• 11 years ago

It depends on if it is in Tier 1 or Tier 2. Tier 1 for companies raising less than $20m/year seems not to have a limit on the percentage of their income.

staunch2• 11 years ago

Why should only rich people get to invest in companies? Anyone can go to Vegas and blow their entire life savings, but buying shares in Dropbox or Oculus at launch is just too reckless?

waterlesscloud2• 11 years ago

It's not like rich people are all that much better at investing in companies anyway. They're just better able to afford the consequences of their ignorance.

spullara• 11 years ago

Vegas is very highly regulated. Every "investment" has specific odds associated with it that are checked regularly. No one presents gambling as a sure thing.

hkmurakami• 11 years ago

I think people are able to evaluate their odds of winning in Vegas better than the odds of their tech investments paying off.

whybroke6• 11 years ago

There are regulations that require thorough disclosure to investors. There is an exemption if all investors are "accredited". Rather than remove the exemption, the SEC has effectively removed the disclosure requirement.

The rule did not protect naive investors from themselves, it protected them from fraud and the economy from bubbles.

If anything, by creating a bubble environment the change will benefit the wealthy at the expense of naive later investors and can be pitched by populists as "wonderful" deregulation.

makomk2• 11 years ago

There's another reason that no-one's mentioned yet: only rich people can afford to investigate and sue if they get scammed.

For example, a few years back there was a Ponzi scheme in the US called PermaPave which took money from a bunch of small investors on the pretext it was being invested in environmentally-friendly stone paving slabs. They didn't make a single cent in profit from the slabs - all the payments out came from other investors' payments in. When the whole thing imploded none of the small investors could afford to do anything about it. Unfortunately for PermaPave, they'd also taken a much larger investment from a company actually interested in buying stuff from them, and when they breached their contract that company had the money to investigate them, figure out that it was a Ponzi, and sue everyone involved.

Another problem is that companies don't want to deal with a load of small investors if they can raise money from a few rich investors instead: it's a lot more work and expense for them, the small investors don't have the same kinds of connections and expertise that the big VCs have, etc. The main reason to raise money from ordinary people is because you're a scammer and big investors have the expertise to spot you, the resources to investigate you, and the money to sue you if they do invest. (The less money you invest, the less you can rationally justify spending on due diligence.)

Ordinary people are at a fundamental disadvantage to the rich here no matter whether they're legally allowed to invest or not.

samspot• 11 years ago

I don't know about you, but I think blowing your entire life savings at Vegas is too reckless.

iamwithnail• 11 years ago

This, a thousand times this. Wealth is not a skills set.

vasilipupkin• 11 years ago

this is a valid argument, however, the opportunities available to non-rich people are very likely to be severely adversely selected ( skewed towards not so great companies )

ChuckMcM3• 11 years ago

I realize you're trolling but you might have just as well asked "why should only people with good credit be able to buy houses?" That might make the fault in that reasoning a bit more clear. It isn't "rich people" who get to invest as it is "people who understand the risks and are prepared for them" get to invest in "untested companies".

The "accredited investor" rules are an imperfect but functional selection mechanism to select for 'understand risks' and they also add the defense that once you lose enough money to fall below that standard you lose the opportunity to keep playing.

Further, anyone, in the US at least, can become a "rich person" by investing in publicly traded companies (or real estate for that matter) prior to investing in non-public companies. Many thousands have.

And finally, I grew up in Vegas and watched it kill people. Mostly people who managed their pennies and saved their savings. And took a vacation to Vegas and if they were very unlucky won a enough money to pay for their vacation on their first visit to a casino. Then went home broke, sometimes bankrupt. There were enough of those people that it left a mark on me. My buddy in high school who worked at a gas station which was on the the way to I-15 to head back to Los Angeles would have sales guys offering to trade him the demo units they had brought to a convention for a tank of gas to get back to the office.

The trick was you had to actually get there, nobody from a casino called you up and started asking you to play games of chance. And all the games are generally playable at home with your own cards or your own dice. So people can get a feel for just how impossible it is to win long term at those games.

No, this isn't about "rich people" and it isn't about "going somewhere to gamble." This is about enabling a class of unscrupulous people a nominally legal framework for stealing from people who can neither afford, nor effectively defend against it.

SnakePlissken• 11 years ago

Not to defend stockbrokers, but part of what made the tech bubble so uniquely frothy was that it was the first time retail investors could easily circumvent the Wall Street gatekeepers via online, discount brokerages. No doubt many mom and pop investors were led into the bubble by advisors, but a sizable portion entered the fray on their own. For a brief time, many malls had trading boutiques, Internet cafés that catered to aspiring traders. Police officers and schoolteachers were quitting in droves to daytrade. CNBC was on in every coffee shop across the country. It's common to hear financial pundits comparing it to the mania of the 20s, when shoeshine boys were offering hot stock tips. I'm not sure we could ever see that level of participation from crowdfunding, but I think you're correct to worry that retail investors will continue to behave irrationally, with or without predatory advisors [0].

[0] http://www.joshuakennon.com/gt-advanced-technologies-bankrup...

api2• 11 years ago

"I'm not sure we could ever see that level of participation from crowdfunding"

I would not bet on that. There could be loads of startups that work to further 'democratize' this.

briandear3• 11 years ago

It shouldn't be the government's role to protect people from their own ignorance or bad decisions. There are unscrupulous people who would try to get people to invest in the 'next Google,' but there are also people that try to sell expensive and worthless things all the time. Government shouldn't be your daddy; adults should have the freedom to invest in whatever they want, regardless of the stupidity of such investments. After all, there ar plenty of crap penny stocks that have no hope of making a return. Wouldn't you rather people invest in our compani s than in some near-bankrupt biotech trading for .32 on the OTC who claims to be looking for a cure to cancer but in fact is nowhere near such a cure?

How about used car dealers? Should we prevent non accredited investors from buying used cars? After all, a car represents one of the worst investments with no chance of capital appreciation. How about Rent to Own shops? Those prey on the stupidity of poorer people.

Let's support freedom and let adults make their own choices, good or bad. Unless we want to ban Keno, the lottery, pay day loans, penny stocks, and let the government manage everyone's money. Of course given the government's inability to manage their pocketbook, I would suspect that the average American is more intelligent in terms of investment screening than the U.S. government. Remember Solydra?

Freedom means even the freedom to be stupid.

_delirium• 11 years ago

There's no actual ban on poor people investing in SEC-registered securities. What is at issue is an exemption to the usual SEC disclosure requirements, which is available in limited circumstances. In cases where a company's investors consist solely of a small number of "accredited investors", Congress enacted an exemption to the usual SEC disclosure rules, on the assumption that such groups of investors have the resources to conduct their own independent investigation of the offering.

A company can choose not to use that exemption, and instead do things the official, open way: issue securities to the general public accompanied by the required disclosures. That allows the company to take investment from anyone, while also protecting the public by ensuring that that the offering is above-board and accompanied by enough information for the public to make an informed investment decision.

BryanBigs• 11 years ago

Very VERY few cars are investments, most are tools.

Lawtonfogle2• 11 years ago

It shouldn't be the government's role to protect people from their own ignorance or bad decisions.

To what extent is a person legally allowed to take advantage of another person's ignorance or bad decisions?

Let's go extreme here. Should there be an age of consent? Yes, because we need to protect children from being taken advantage of because of their ignorance and likelihood of making bad decisions.

Thus we have already determined that, at least in some cases, the government's role IS to protect people from their own ignorance or bad decisions.

adults should have the freedom to invest in whatever they want

What happens at 18 that means we can protect the child but not the adult? While growing knowledge and wisdom and an increase in brain maturity means we can lessen our protections, there is no justification from going from full protection to no protection on their 18th birthday (or whatever birthday you consider someone to become an adult).

Now, I'll accept that we can't protect them fully and this protectionism must be weighed against freedoms. But this is why a ponzi scheme is illegal while a lottery is not (assuming the lottery follows regulations). There is an issue with regulatory capture that we need to remain vigilant of.

mellavora2• 11 years ago

Agreed, we have just entered bubble mode.

s_henry_paulson• 11 years ago

The bubble started long ago.

This is what happens when you have lots of extra money floating around and traditional investments aren't producing results that can beat inflation.

People have been shoveling large amounts of money into tech for way too long, and even last year WhatsApp was sold for ~20 billion USD.

We've now past that and are now at a point where we're going to pump that bubble up even further.

marze• 11 years ago

There will always be people losing money in dumb investments. But with more diverse investment in startups, we should see a greater number and variety of successful ones.

neovi2• 11 years ago

I've been reading through the sections for the past hour, so not enough time to get the full context, and a few questions arose:

1. I see that companies using Rega will have to file with the SEC, but does that mean the registering companies will be private or public?

2. If registering companies have to disclose information and it is available on EDGAR, will it be on EDGAR as a reference to a hard copy or will it be available to view online?

3. Is it possible to see a list of companies actively seeking crowdfunding that are currently pursuing Rega exemption? Or is it considered a private offering?

There are more questions, but I think that's a good start to get out of the way for us.

rdlecler15• 11 years ago

I run http://agfunder.com and our General Counsel is a former Chief at the SEC.

This is a non-starter and will only be used in special circumstances. Just because you have rules that allow non-accredited investors to invest, most companies do not want investments less than $10-15k on their capable. In effect you exclude most non-accredited investors anyways. The exception of course is for the earliest stage companies, but then they run into another problem: legal fees on a Reg A+ Are going to run you $40k-$70k. Compare that to $2-$5k for legal using a YC/500/TechStars template doc. The cost of admission is to high.

FundersClub and AngelList will also not benefit from this either because the New rules don't extend to fund structures like the 506(c) rules. So even if you could create some reusable template document with exhaustive disclosures you can't use it for these purposes. Jobs Act 2.0 may address this next year, but for now these rules are largely useless in practice.

fapjacks• 11 years ago

Thanks for your insight. Can you elaborate on why the "Jobs Act 2.0" might help the uselessness of these rules?

rdlecler15• 11 years ago

Jobs Act 2.0 may allow for a fund structure model. This potentially has its own issues, but net-net I think it's a positive. Regulation tends to favor large corporations because they can afford the regulatory burden.

technotony• 11 years ago

Can you elaborate if you can do SPV investments with this structure? That's the way Angellist and others avoid having many smaller investors on the cap table - you get one line item for the SPV.

nowarninglabel• 11 years ago

For a slightly different perspective, I could see this making certain forms of loans we do in the U.S. possibly easier and/or allowing for more involvement from lenders (at Kiva). Our legal counsel is very conservative though so I wouldn't imagine that being the case any time soon even if it does allow for that.

blumkvist2• 11 years ago

Pretty much the only people who will benefit are those looking to run ponzi schemes.

gfodor• 11 years ago

I think the problem with this type of argument is that all the things you mentioned will have to be reconsidered if the pool of potential investors widens to include the general public. For example, if I have to live with a large cap table in order to have a chance to fund my venture, then of course I'm going to live with it vs not starting my company. The admission fee is a fair point but at a high level if there are tens of millions of potential "investors" out there now for startups who market themselves well enough then the market will find a way around the admission fee.

rdlecler15• 11 years ago

Europe has had a structure in place for awhile and these companies are accepting smaller dollar amounts. Still, raises tend to be a couple hundred thousand dollars when they are successful, and it's not going to be a common avenue for a company to raise large amounts of money. If you're doing something esoteric but popular you can go to Indiegogo/Kickstarter and resell without dilution and without SEC oversight.

If the SEC provides a way to pool together smaller investments in a fun structure they would have be able to invest in opportunities like Uber. Probably the safest path (albeit venture investing is very very risky) is when investors get to invest alongside professional VCs because the company will have been better diligences, better capitalized, and there will be management oversight.

brudgers• 11 years ago

The concern is not about the conduct of people with a former SEC grand poobah on retainer.

People running scams won't worry about all that stuff that separates legitimate from illegitimate. What this does is provide an easier way to appear legitimate to a wider section of the population. $70k in legal fees is just chump change if you can get 1000 $2k investors in two hours over the internet. And maybe get a small time lawyer to do the paperwork in exchange for equity.

rdlecler15• 11 years ago

First, these need to be reviewed by the SEC. Second to raise this money on the Internet you are going to have to go to a platform with a large base of investor (Most of those will have broker dealer licenses ame will do their own DD). Next You are assuming that just because something is online that tens of thousands of people are automatically willing to plop $10-$1000 to invest. Well I'm sorry, but that's not how it is going to work. Companies in Europe with lots or press are only raising a few hundred thousand. To move the needle you need much larger checks. At some point, something will slip through but it will be an anomaly and the overall risks are outweighed by the benefits.

api2• 11 years ago

Real companies won't want a bunch of gnats on their cap tables, but scams won't care.

Honestly the fact that this still makes it hard for legitimate companies to raise from the public means that the likelihood of the public being exposed to scams is actually higher. It's an either-or thing. Either just open things up, or don't, but going half way is actually more dangerous.

curiously• 11 years ago

year 2000 here we go!

raithe1337• 11 years ago

before getting too excited, let's see how it looks when it is ready.

zaroth• 11 years ago

Access to capital shouldn't require flushing $100k down the drain to get started. I have faith the technology will evolve to make companies click-to-start, and cheap to maintain, even allowing unregistered securities in those companies to be traded freely by the public.

To the companies who are trying to build walls and dig trenches around marketplaces which serve this end, personally I hope they all fail, and we end up with a distributed network which can host the necessary ledgers and market-making functions required.

If anyone here has the legal chops to help build this, please email me ;-) I've done my own 506(b) and I could build the distributed trading engine (did similar work on colored coins) and I would love to open source and democratize a platform for this.

I look at what SolarCity did with SolarBonds, which is a platform built by Common Assets who they acquired (unknown amount), if you've tried that platform, I think you have a taste of how SME companies could sell their equity.

I think the right platform can also significantly reduce the burden of an extremely long-tail cap table.

From a fund / roll-up perspective, the companies host their own trading platform, there's no reason the funds can't buy shares right on there, bundle, and resell the mix to their LPs. Someone like FounderFund benefits by being able to cheaply (as in transaction fees) acquire equity in many company who are running the A+ platform.

zo1• 11 years ago

Sort of like an open-source stock-exchange? Though I love the idea, I'm positive that you'll hit against all sorts of legal/political walls before it gets off the ground.

I've always believed that tech can be a great equalizer, and this would be a step in the right direction.

anigbrowl• 11 years ago

It does seem like a lot of overhead. I've been reading this with interest because I had been wondering if it might have positive implications for indie film financing (which usually goes through regulation D for mid-size projects; there's a real opportunity for seed/small project financing at the bottom end of the market), but don't see these changes having much impact in the short term.

im2w1l• 11 years ago

There are a number of shady bitcoin denominated stock exchanges, that are close to your vision of "click-to-start"

yueq• 11 years ago

1999 bubble is from secondary market. Now it's the first Primary market.

mellavora2• 11 years ago

Interesting that this shows up on HN on the same day as: "fantasy angel investing" http://exchangel.co/

mqsley• 11 years ago

It's about time really. Here in the UK equity crowdfunding has given much needed capital to businesses.

Does everyone invest? Hell no. Do wealthy people now diversify their portfolios with risky start ups? Yes.

There are vigilant checks every investor has to go through that limits the amount of capital they are allowed to invest which limits the risk for even the littlest of guys.

When you go to invest you are warned, I mean REALLY warned several times that you will probably lose your investment.

This could actually reduce said "bubble" as private investors are not stupid and the valuations you see are very modest.

My final point would be that the fundraising activities are open. The companies are subject to heavy scrutiny through Q&A's and all potential investors can see these conversations occurring.

I personally have chosen not to invest in companies that others are flocking too as their answers to my questions are so theoretical and I know many investors who have felt the same.

DennisP2• 11 years ago

That's a good point. There's been a lot of scaremongering on this issue, which ignores the fact that in various other countries the general public has been able to invest in startups for a long time, without the ill effects so many people predict in the U.S.

beagle3• 11 years ago

For whatever reason, the US seems to dislike experience from outside the US - that goes for both regulators and voters.

Despite Canada, Europe and Japan having efficient functional socialized medicine for at least half a decade, the discussion in the US was about "death panels" and "health welfare queens" and other completely nonexistent issues anywhere else.

There are a lot of other such issues, such as gay marriage, gambling, etc - that I don't find it surprising that crowdfunding is also part of that group of subjects. I only find it sad.

(On the other hand, significant gun-associated violence is practically unheard of outside the US, even in places that have comparable gun density such as Switzerland and Israel, where almost all males have access to guns, and some cities in Canada; So maybe the US actually is a special case)

dataker• 11 years ago

I've seen thousands of equity crowdfunding platforms and numbers are somewhat alarming. While we have leading platforms(think Angellist), there are many competing WordPress platforms with security and marketing issues.

In order to compete, these platforms will promise a "money fast scheme" promising to turn $50 into $50k. The main issue is that 1000x unicorns would rather do it the other way and most available startups would be somewhat inferior in terms of investment.

While it's good to have this provision, it doesn't change a lot of the landscape of investors.

Nursie2• 11 years ago

So does this enable stuff like, say, crowdcube in the US?

Because personally I always thought kickstarter should have been a platform for micro-investment rather than (effectively) a pre-order shop that sometimes lets people down.

fnordfnordfnord• 11 years ago

Does this mean people may be able to purchase equity through something like kickstarter?

Nursie2• 11 years ago

I didn't get an answer on my similar question, but here in the UK we have something like that in operation already - crowdcube.com

I've not used it yet myself, but I find the idea compelling because it allows people to actually invest in companies that need funding, rather than just pre-order.

It seems to support loans with a set interest rate or actual micro-equity. I might actually get around to investing through it someday...

ovi256• 11 years ago

There's been a boom in France as well in crowdfunded equity. A startup I did some work for did it, and were happy with the results.

matthewmcg2• 11 years ago

The headline is not quite right. These are rules implementing Title IV of the JOBS Act, which facilitates offerings by small companies subject to certain filing and disclosure requirements. The rules for Title III offerings through an internet fundraising platform (the real "crowdfuding" provisions of the JOBS Act) are still pending.

A better headline might be "SEC adopts rules for small public offerings."

xhrpost• 11 years ago

Thank you for that, I was very misled by the title. Can you possibly explain this one bullet point in the text? (Only mention of a non-accredited investor). "A limitation on the amount of securities non-accredited investors can purchase in a Tier 2 offering of no more than 10 percent of the greater of the investor’s annual income or net worth."

matthewmcg2• 11 years ago

Companies can sell to both accredited and non-accredited investors. But non-accredited investors can't purchase more than the 10% annual income/net worth limit.

shawnee_• 11 years ago

A long overdue step in the right direction.

Some historical perspective on the history of what I like to think of as the "Cookie Licker Laws" [a].

A middle-of-the-road option for both investors and entrepreneurs in this space has been desperately needed for quite some time. The path from modest wealth to the truly lucrative risk-reward based ROI that comes from being to invest intelligently in emerging ideas and trends ... this path has been littered with roadblocks and land mines for way too long.

On the investor side ... a ~couple years ago I remember being pretty upset that Lending Club didn't publish their "investor income / net worth requirements" straightaway transparently their site. Rather, they first send investigators on the wild goose chase through their idiotic application process.

As far as the entrepreneur side goes: YC has become a less and less attractive option for companies that might not (at least not obviously) quite make it to the $10B potential breakout point that they're looking for: I always tell my partners that our job is to fund all the companies we can that can be worth $10 billion or more. That’s such a difficult constraint we can’t have any other constraints. [b]

Not every business idea should have to be that "big" to be given a fair shot at the route from small-time garage venture to IPO.

[a] http://ink.hackeress.com/2013/09/what-title-ii-of-jobs-act-m... [b] http://blogs.wsj.com/digits/2015/03/25/sam-altman-why-hardwa...

zekevermillion• 11 years ago

The important part is preempting state law requirements. That's the only reason this matters.

mapgrep2• 11 years ago

No, no it does not. How is this headline still up? It's totally inaccurate. Equity crowdfunding from unaccredited investors was provided for in the JOBS Act. The SEC doesn't get to set the law, Congress does.

What the SEC has been doing has been figuring out rules for how this law will be implemented. NOT allowing equity crowdfunding was never an option.

Here is the SEC headline: "SEC Adopts Rules to Facilitate Smaller Companies’ Access to Capital"

That is accurate.

Here is the fourth sentence of the press release:

"The rules are mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act. "

It's really embarrassing this has been up on Hacker News so long and not fixed (or commented on? wow).

clavalle5• 11 years ago

I think anyone interested would already know all of that.

Without the SEC rules crowdfunding is in stasis. With rules things can move forward. I don't think anyone thinks the SEC is affecting the existence of crowdfunding beyond that.

Accuracy of language is important but so is context.

mapgrep2• 11 years ago

It is simply inaccurate to say SEC "approved" crowdfunding. It is outright wrong. Saying that "anyone interested" would know the truth doesn't change that.

"With rules things can move forward. "

The SEC is legally REQUIRED to issue rules.

toddbcrosland• 11 years ago

Shameless plug here - I'm Todd Crosland, one of the co-founders of http://seedequity.com, and we are deeply interested in solving these information asymmetry issues, risks, and cap table problems mentioned here. We'd be very interested in getting feedback from any of you about our process and are always seeking better ways to reduce these risks.

We are a registered broker-dealer with the SEC, which means that we have extremely high compliance requirements for advertising, employee licensing, bad-actor background checks, data security, audits, and more. We try to go the extra mile with our background checks, rejecting founders and investors with backgrounds with any hint of questionable behavior, even if they haven't broken any securities laws. Our regulations require us to share disclosure documents, which describe the risks faced by each company, allowing investors to have a balanced view of each offering.

From what I can tell spending time in Silicon Valley over the years, it appears that some of the discouraging wealth disparity there exists because a select group of employees and investors has had access to equity in great companies, while the rest of the population is shut out. With the SEC's carefully crafted protections in place for non-accredited investors, hopefully more small-time investors will have access to high quality, medium to pre-IPO -sized companies. If such companies are willing to accept many non-accredited investors in Reg A+ offerings, they will need a regulated entity, like a broker-dealer, to help them.

In any case, I'd be grateful to hear your feedback. You can reach me at crosland at seedequity dot com.

SEC Approves Equity Crowdfunding from Unaccredited Investors

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