March 31, 2020
Thank you for the opportunity to comment on the SEC's proposed amendments to the equity crowdfunding regulatory framework that are described in the proposed rule Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets, Rel. Nos. 33-10763 and 34-88321 File No. S7-05-20.
I submit this brief comment in my capacity as a non-accredited investor in crowdfunded equities. It addresses Request for Comment No. 60, "Should we, as proposed, increase the Regulation Crowdfunding offering limit from $1.07 million to $5 million? Is another limit more appropriate? Would increasing the limit encourage more issuers to use Regulation Crowdfunding? Are there additional investor protections we should consider in connection with the increase?"
I am concerned that the Commission's decision to raise the offering limit on Regulation Crowdfunding is premature. No one involved in equity crowdfunding knows whether this experiment is a productive or destructive use of capital. This is expected given the newness of Regulation Crowdfunding, but if it is too new to evaluate, then it is too new to expand. If the Commission expands Regulation Crowdfunding without having determined its capacity for value creation, it could introduce a systemic risk into the economy.
Instead, in addition to its efforts to ensure that investors have all the information they need to make rational capital allocation decisions, the Commission should also focus on supporting the development of a robust secondary market for crowdfunded securities. A secondary market would provide immediate information about whether the millions of dollars invested in Regulation Crowdfunding campaigns so far have been put to productive use. Only once it is clear whether crowdfunded securities are capable of producing a positive return for investors should the Commission consider expanding their use.
Thank you for your consideration.