SEC'S Crowdfunding Proposal: Will It Work for Small Businesses?

Jan 15, 2014

Daniel S. Gorfine

Publisher: Milken Institute

In his January 15, 2014 testimony before U.S. House of Representatives Small Business Subcommittee on Investigations, Oversight and Regulations, Daniel Gorfine discussed the Jumpstart Our Business Startups Act (the JOBS Act) and its provisions that address capital flows to small enterprises.

The JOBS Act employs a holistic approach to promote an enhanced and well-functioning capital-access pipeline for American businesses at each stage of their development. To fulfill this objective for startups and small businesses, the SEC should foster the development of "crowd investing" by minimizing costs and constraints associated with this new capital-raising tool, while simultaneously limiting downside risk to investors through an emphasis on investor caps. This approach will allow for the evolution of this market innovation and the related opportunity to assess its central hypothesis: that in an interconnected Internet-centric world there is "wisdom in the crowd."