February 28, 2014
To the SEC,
I think the idea that the proposed rules are designed to "protect" non-accredited investors is complete hogwash. The real motivation is to protect accredited investors from competition. That is a uniquely un-American position for a federal agency to take and it is a position that represents the height of hypocrisy for accredited investors to support given their constant harangue about the benefits of free enterprise and competition. Adopting audit rules that will cost tens of thousands of dollars to comply with for an insignificant $500,000 investment opportunity is to defacto kill off this important aspect of the Jobs Act. This wringing of hands over the risks the average person will face putting in one or two thousand dollars in an investment is truly high theater. Where was all this caution and attention to detail when Wall Street was robbing the country blind, destroying unaccredited investor's retirement funds and putting this country into recession? If we care so deeply about the money the average investor could lose, why don't we regulate the usurious interest rates the credit card industry charges or protect average American by putting limits on card offers? Besides, as a practical matter, banks, venture capitalists, angel investors and the like have not been doing their job to revitalize this economy and have been essentially sitting on the sidelines because their investment criteria are so conservative. The result is a virtual log jam of great ideas that are going unfunded and an economy that is continuing to struggle to pull itself out of the worst downturn since the Great Depression.
I think we could offer substantial protection by only allowing licensed crowdfunding groups to offer investments to non-accredited investors and by maintaining a listing of such groups, their offerings and track records, at the SEC website. Additional rules could be adopted that require these groups to follow disclosure requirements that would be robust but that would not result in a costly compliance premium. An ability for the public to post comments at the SEC would also help to separate the good from the bad. In this way, a crowdfunder that has a string of failures and/or noncompliance issues would face loss of their license or possibly even criminal penalties. Additionally, the internet would play a safeguarding role because new scam sites would arise that investors could search for information about the legitimacy or not of the opportunity. Yes, some people have been duped into paying money in the hopes of releasing a multi-million dollar inheritance sitting in a bank on another continent, but I think the person investing in a crowdfunding opportunity will not be that easily duped. And we have to weigh the potential good non-accredited investor crowdfunding will bring to our economy against the relatively small chance that some criminals will succeed in stealing money from unsuspecting investors and the chance that any one investor will lose a crippling amount to such criminal elements.
In conclusion, the SEC has the chance in a very small way to crack open the door for the average American to what has heretofore been an exclusive investment club in which they could not be members. So, be bold and not coerced by moneyed interests that want to maintain the status quo and prevent the average American from enjoying the benefits of free market capitalism directly for themselves.