As soon as the JOBS Act passed back in April, would-be equity-based crowdfunding platforms were crawling out of the woodwork, ready to be open for business as soon as the S.E.C. handed down the rules governing this wild financial frontier.
But it seems they might be all dressed up with nowhere to go, for now at least. The New York Times reports that the S.E.C. is most likely going to blow its end-of-year deadline. In fact, it might be 2014 before equity-based crowdfunding is a reality. Hope your startup wasn’t depending on selling shares to average Internet joes!
Now, before you start grousing about government inefficiencies, there’s some question about whether the deadline was ever really doable in the first place:
“It’s actually a significant job to do the regulations in this area, so it was an unrealistic expectation that the S.E.C. would have it completed by now,” said Barbara Roper, director of investor protection for the Consumer Federation of America, which is lobbying the agency on other aspects of the JOBS Act.
The trick is balancing investor protection with the reality that a crowdfunding platform might collapse under the weight of the traditional regulatory burden. For example, the S.E.C. wants a requirement that anyone raising more than half a million dollars must pony up audited financials. Just imagine how Kickstarter projects would fare under that kind of burden.
On top of everything else, the S.E.C. is in the midst of a leadership shuffle, with chairwoman Mary Shapiro taking her leave–along with the underlings who ran the regulation-writing office.
Welcome to the swamp that is Washington, D.C., citizens of Startupland.