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S.E.C. will miss crowdfunding regulation deadline, JOBS Act won’t go into effect at least until 2014

crowdfunding

For the wannabes  that don’t have hundreds of thousands or millions of dollars to throw around, the Jumpstart Our Business Startups Act (JOBS) was an opportunity for small time angel investors to get into the game and for small businesses to raise money through crowdfunding. But eight months after President Obama signed the bill, The New York Times reports that the Security Exchange Commission (S.E.C.) has fallen behind and isn’t on track to meet the end-of-the-year deadline, meaning that it may not be until 2014 before the JOBS Act takes effect.

If anything, you should blame changes in the SEC for delaying hopeful investors and entrepreneurs that were looking forward to the democratic style of investing come 2013. The JOBS Act, when it would finally come into fruition, would allow a startup to sell up to $1 million dollars of its stock to small-time investors (even someone with just $1,000) in a twelve-month period. It’s one way for small businesses to sell equity in their company without resorting to the expensive IPO process.

For now, what’s holding back the S.E.C. is a couple of factors. S.E.C. chairwoman Mary L. Shapiro and three of her “top deputies” have left their positions thereby marring any attempts to meet the 270 day deadline that Congress had set for the S.E.C to pull through with written regulations. The S.E.C. however has had to deal with some complicated rules and regulations.

If you’ve kept up to date with Kickstarter and IndieGoGo projects, you’ve heard about the horror stories. Excited funders dumping thousands of their hard earned dollars into a hundred thousand dollar campaign only to find out that the founders have squandered their cash or run with the money. While this type of issue has largely been a problem for crowdfunding sites today, more important and relevant matters that the S.E.C. have to tackle include protections for the investors and a regulation, unfavorable for small businesses, that requires them to disclose audited financials to prospective investors.

Crowdinvesting startups like WeFunder are hinging on the JOBS Act but before new investors pull out their checkbooks, we’re still going to have to sit back and wait until the S.E.C. sorts and settles on a fine print that everyone can agree on.

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