Hopefully, the SEC won't make the same mistakes they made in allowing the Pinksheet market to be such a cesspool. But I doubt it.
It sounds like the same arguments are being made.
But the SEC has struggled with how to craft a workable rule that strikes a balance between helping to knock down barriers for startups, while also protecting investors from fraud.
Prior to Congress passing the law, a raft of measures were added to the bill that investors advocates say will help protect consumers.
One provision requires companies raising more than $500,000 through crowdfunding to provide audited financial statements. The measure is designed to give investors more information about the deal. But critics say it is simply too expensive, noting many startups do not have the money to hire lawyers or accountants to help them.
Another area that advocates of crowdfunding will be watching carefully is how the SEC ensures investors do not exceed the limits on how much they can contribute. The law says investors with a net worth or income of less than $100,000 can only contribute $2,000, or 5 percent, of their income. Those with a net worth or income over $100,000 can contribute more.
Many experts have argued that companies and crowdfunding portals should not have to verify income and net worth, saying it would be too cost-prohibitive. Industry experts are expecting the SEC to consider easing this burden by allowing them to simply rely on the information that investors provide.
