By Richard Swart on Thursday 29 October 2015
In what can only be attributed to overwrought fears of fraud and abuse, the United States has dithered in passing regulations to allow equity crowdfunding for retail investors. This Friday, October 30th, the US Securities and Exchange Commission will be voting on the final rules to allow these rules, and also to modify Section 147 of the Securities Code – which implies that they are going to make it easier to raise funds in specific states in the US, or within some form of regional exchange.
The tension around these rules highlights one of the key reasons that US financial innovation has fallen behind the United Kingdom and Asia. Regulators are dealing with the peculiar American tension between state and federal governments – really a battle over local control versus national policy. It also highlights the reason why reliable and objective data is so crucial. The US markets have been fairly opaque, and the limited efforts to produce reliable indices are lacking.
With these rules, dozens of US platforms will pivot their models to allow non-accredited investors to purchase securities in small private firms. With the meteoric rise of real estate crowdfunding in the United States – with over 100 platforms, billions in listings, and major commercial firms launching platforms to attract investors, it is likely we will see dozens or hundreds of real estate sponsors attempting to use these regulations quickly.
With the first chapter of the US JOBS Act saga coming to a close on Friday, the US Congress and a small number of industry insiders are busy working on the next chapter - JOBS Act 2.0 – to undo some of the structural flaws created through political compromise, and try to open these markets even further. Should the US align its financial policies to promote the innovation engine that flourishes despite our antiquated and excessively costly regulatory schema, then the US could unleash a significant vehicle for job creation and wealth creation among its ever shrinking middle class.
These issues, and more broadly the challenges of Framing the Future of Alternative Finance, form the focus of our event in Washington DC on November 4th: "The Global Regulatory Forum 2015". It's the first global event to be dedicated to exploring how regulatory policy and government legislation can impact the development of the world's many and varied alternative finance markets. The future of JOBS Act will be just one of the many topics under discussion. The speakers themselves will range from senior platform representatives, to regulators, to high-level government officials and beyond. Myself and David Stevenson (Executive Director, AltFi) will be moderating at the event. I hope to see you there.