Oh what crowdfunding could be. If only the U.S. Securities and Exchange Commission would get its act together.
So says the Washington, D.C.-based American Institute of Architects (AIA).
Crowdfunding, the popular form of raising money via Internet sites like Kickstarter and Indiegogo has taken off in the last few years as a way to back everything from films to light bulbs to skyscrapers.
But crowdfunding is missing one ingredient that would help it push forward economic recovery: Investors cannot use crowdfunding sites to purchase equity and thus gain the potential financial rewards of shareholding. Today, funders basically make donations.
Congress' Jumpstart Our Business Startups Act cleared the way for crowdfunding equity last April, and gave the SEC until the end of 2012 to facilitate it.
The SEC missed that deadline. Now, a year after the JOBS Act, the SEC still hasn't moved. That has irked many people and organizations like the AIA, who say that equity would generate a lot more interest in crowdfunding, to the benefit of jobs, the economy, and infrastructure.
Paul Mendelsohn, AIA's vice president of government and community relations, has written a strong letter to SEC chairman Elisse Walter, beseeching the regulatory body to write equity provisions, and berating it for not having done so already. You can read the letter here. Some excerpts:
"With the economic recovery still tenuous, any financial instrument that can help create jobs through new products, innovations and designs must be a top priority. ...
'The SEC has already missed Congress’ year-end deadline to write the Equity Crowdfunding regulations, leading to additional delays and market uncertainty. Further delays in issuing rules hamper the intent of the JOBS Act: addressing a still high 7.9 percent unemployment rate...
"Architects and design professionals of every industry are awaiting these final regulations to further develop businesses and provide increased value to the American economy.
"As our nation emerges from one of the worst economic downturns in recent history, and at a time when budget sequestration threatens further economic hardship, it is imperative that the SEC fulfills its obligations and completes the writing of the rules necessary for this business financing tool to be put to use by the public."