Waiting for Clarity

It has been a while since we updated the blog. No, we haven’t lost our love of crowdfunding. Rather, we have been spending much of the past month meeting with entrepreneurs and talking about the promise and peril that crowdfunding poses. These conversations have been inspiring and informative. They also show that there is a need for more information and clarity about how crowdfunding is going to work.

An example of this is a recent survey conducted by Pepperdine University and Dunn & Bradstreet Credibility Corp. found that only 3 percent of business owners believe the passage of the JOBS Act will increase the likelihood that companies will use crowdfunding to raise money. A major issue reason for this low enthusiasm is uncertainty on what the securities-based crowdfunding process will entail. After all, until business owners know what they will have to do to pursue securities-based crowdfunding they don’t know if it will be worthwhile to try.

Unfortunately, we will not have the answers until all of the rules and regulations (both from the SEC and the relevant self-regulatory organization) are finalized. While the SEC is still seeking input, we expect it will soon release proposed regulations. Once this happens entrepreneurs and potential investors will have a much better sense what crowdfunding will look like. They will also have to engage in the formal comment process to make their concerns heard by the SEC. While commenting is not hard, all things being equal, it is probably easier to influence the SEC before the proposed regulations are out, so if you have something to say, say it now!

When the SEC does release its proposed regulations we will do a major analysis of them, including perhaps an all-nighter or live blog the day they are released (fun!) that will be available on the site, so watch for that. Once the crowd can see the proposed regulations we will all be in a better position to determine whether crowdfunding under the JOBS Act is ready for prime-time, or needs some modifications.

In the mean time, we at CrowdCheck will wait for the SEC, continue educating -and being educated by- the entrepreneurs and investors we meet, and building the best system we can to ensure that crowdfunding is free from fraud.

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