January 9, 2014
Page 280.
Liability transfer to the portal. Many of the crowfunding and equity funding sites have indicated they will not become involved with these types of offerings in large part because of these liability issues. These provisions would result in a high degree of risk for the listing service. It will also create high insurance costs that will be passed down and potentially make the cost of using the portal significant enough as to discourage its use by small businesses, the very target of these type of investments.
Page 92.
This page requires an ongoing annual reporting requirement for businesses that have raised funds through crowdfunding. While this sounds reasonable, the cost associated with it is much too high. The annual cost will prevent business from using corwdfunding and the spirit of the rules will be violated. We must remove find a way to hold the cost down so that a prudent small business can use this method of raising capital.Rather, the focus should be more on the upfront disclosures of the businesses' plans and outlooks, rather than reporting after the investor has already committed the investment.
Page 22.
This page sets limits on individual investments. While the spirit of these rules is valid and provides for a way to make sure an investment is suitable for a non-accredited investor, both the limit on how much the investor can invest and the amount of investment a start-up can accept each year are unreasonably small. Most of my clients, including film production companies and high-tech start-up would need higher limits to make this procedure workable in most cases.