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When President Obama announced the Jobs Act in April, he called one particular provision a “game-changer.”As a part of the law, Startups would be able to raise money by selling equity through the Internet.
This was going to be a boon for small businesses and crowd-funding platforms like Kickstarter and Indiegogo.
The change was supposed to go into effect by 2013.
But it’s not going to, according to a New York Times article by Robb Mandelbaum.
The reason: the law requires that the securities and exchange commission (SEC) create a bunch of new regulations for crowd-funding, and the SEC is taking its sweet time.
This makes sense: crowd-funding over the Internet will create LOTS of opportunity for fraud. Also, lots of investors are going to make bad bets and lose a lot of money. Both events will cause people to sue. And so the SEC needs to make sure that everyone is clear, at the outset, about who is liable for what.
And that’s taking a while, especially since the SEC boss, Mary Shapiro, just stepped down.
Also, this is the government we’re talking about here.
People are upset.
People like Kim Wales, for example.
Wales is an “organiser” at Crowdfund Intermediary Regulatory Advocates, and industry organisation.
She told the New York Times that the SEC’s deadline, which it is going to ignore, “is not a suggested timeline; it is a Congressional mandate. The SEC answers to Congress, not the other way around.”
One reason the whole process is taking so long is that the SEC wants to put in rules to prevent that the crowd-funding industry thinks are burdensome. One example: The SEC wants businesses that raise more than $500,000 to have audited finances. An executive from Indiegogo says this is a “massive dealbreaker.”