Regular readers know that we have often discussed "crowdfunding" -- authorized by the "JOBS Act" signed by President Obama with much fanfare, but obstructed by his Securities and Exchange Commission, at least by dint of inertia. Along comes a useful suggestion for experimental regulation to free companies to raise money via social media:
President Obama signed the law this past April, and the Securities and Exchange Commission is tasked with implementing its provisions. But the agency has been slow to adopt new regulations and is asking for more time. The delay has been attributed to the complexity of the issues and the need to get the rules right....An excellent idea, assuming the delays in implementing the JOBS Act are in fact in good faith. Given the evident bad faith in other regulatory delays, call us skeptical.
A regulatory experiment might do the trick. Specifically, the SEC, in adopting its rules, could treat crowdfunding with a relatively light regulatory touch: for example, by not requiring audited financials but specifying that the rule will expire after three to five years. If the evidence over that period suggests the incidence of fraud is high, then the agency might impose stricter and more permanent requirements.