Keep It Light, Chairman White: SEC Rulemaking Under the Crowdfund Act

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Vanderbilt Law Review En Banc

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Schwartz, Andrew A.
Crowdfunding; Securities; JOBS Act; CROWDFUND Act; SEC; Regulation; Investor protection; Annual cap; Administrative Law; Banking and Finance Law; Law and Economics; Legislation; Securities Law
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Title III of the JOBS Act, known as the CROWDFUND Act, authorizes the “crowdfunding” of securities, defined as raising capital online from many investors, each of whom contributes only a small amount. The Act was signed into law in April 2012, and will go into effect once the Securities and Exchange Commission (“SEC”) promulgates rules and regulations to govern the new marketplace for crowdfunded securities. This Essay offers friendly advice to the SEC as to how to exercise its rulemaking authority in a manner that will enable the Act to achieve its goals of creating an ultralow-cost method for raising business capital and democratizing the market for speculative business investments. The whole crowdfunding project depends on a very simple and inexpensive process for offering securities, so it is vital that the SEC not burden the CROWDFUND Act with any more rules and regulations than are absolutely necessary. Rather, the SEC should rely primarily on the existing statutory scheme, especially the novel $5,000 aggregate annual cap on crowdfunded securities which acts as a structural protection against losing one’s life savings to a crooked crowdfunder.