May 1, 2012
The need for crowdfunding has become more urgent as access to venture capital has become harder for entrepreneurs, start ups and small businesses. To protect this up-and- coming fund raising vehicle from fraud, I recommend the following:
1) Require each individual seeking to invest more than $2,000 to take a 5-10 minute on line course with a short quiz at the end on possible pitfalls of crowdfunding.
2) Separate the function of safe keeping of the funds and administration of the web portals dedicated to crowdfunding that is, funds to stay in an escrow type account managed by more tightly controlled entities until a project is at a point where funding needs to start. Put the financial controls on where the $ is and where its kept.
3) Don't require crowdfunding portal owner/operators to take exams designed for security brokers. This requirement does not make any sense and will stifle creativity by preventing many young and talented web based entrepreneurs to enter this field.