October 20, 2010
These comments relate to petition 4-605 for a rulemaking change.
Mark Twain, an American observer and writer widely known for his great probity and complete unwillingness to exaggerate for effect (well, OK, "complete" might not be exactly the word here), lets us hearken back in Roughing It to a time before securities regulation:
"My pile of stock was not all given to me by people who wished their claims "noticed." At least half of it was given me by persons who had no thought of such a thing, and looked for nothing more than a simple verbal "thank you;" and you were not even obliged by law to furnish that. If you are coming up the street with a couple of baskets of apples in your hands, and you meet a friend, you naturally invite him to take a few. That describes the condition of things in Virginia in the "flush times." Every man had his pockets full of stock, and it was the actual custom of the country to part with small quantities of it to friends without the asking."
The success of crowdfunding sites such as IndieGoGo and Kickstarter show that securities regulation hasn't changed American generosity. What it has changed is Americans' ability to pass that generosity forward by sharing their stocks with friends. Americans today still sit on top of a gold mine -- albeit of intellectual property rather than quartz veins -- and everyone has the prospecting tools to stake a claim. What we've lost is that democratic ability we once had for absolutely anyone staking a claim to offer equity in it when approaching their community to begin financing infrastructure for developing the claim. Now you first need lots of money and lawyers to have that chance to make more money.
Would allowing crowdfunded equity offers help promote business formation, as the SEC is charged to do? Crowdfunding already offers a sort of pride of ownership by letting people associate themselves early with offerings of ingenious ideas, but it doesn't let folks trade or give away those associations like real equity does. Crowdfunders already accept the certainty of total financial loss in creating these associations with ingenuity. Letting them have instead a small chance of financial gain, and the pleasure of sharing that possibility as they choose, seems like an appropriate step for the SEC.
I ask you to develop a rule based on this petition and the many insightful public comments it has generated (in particular, raising the investment limits from the original proposal as many suggest, and including a federal registration light as James Angel suggests -- with Angel's proposed warning rephrased to say Your crowdequity experience will likely include the complete loss of your investment).
Coaccession... because art does not live by appreciation alone