SEC Chair & Former Chair Challenged To Cage Match For Right To Determine Who Makes Crowdfunding Rules

The federal government using the infinite wisdom that has led to a $15 trillion deficit has decided to order the SEC inject itself into private lives by requiring people who want to go into crowdfunding to register all in the name of fiscal accountability. Why?  Because one of the government mottoes is, “If it ain’t broke, fix it ‘til it is.” Since crowdfunding has so far been incredibly simple and so easy anyone with an internet connection could do it, government regulators have insisted something be done to complicate matters.

The SEC website has several links discussing the Jumpstart Our Business Startups (JOBS) act which contains language like “Cost-effective access to capital for companies of all sizes plays a critical role in our national economy, and companies seeking access to capital should not be hindered by unnecessary or overly burdensome regulations.” Reduced to plain English this means “It’s going to get a lot harder as soon as we find enough sociologists and lawyers to make it as confusing as possible.”

Actual crowdfunding websites approach it from the “Hey! C’mon and sign up today!” direction.

Go to the SEC website and you might be able to find a “FAQ” list to help you register your crowdfunding company. Pack a lunch because you’ll be there a while looking for it.

Since I have a near genius IQ, I am too smart to understand the FAQ. So I contacted a friend who once worked for the government.  Well, he was a test subject in a military experiment, so close enough.  Without further ado, here is what we, Richard “The Vermin” Thundersquat (he moonlights as a professional wrestler) and I came up with after reading the FAQ.

Question: I want to start a crowdfunding business.  What do I need to do?

Answer: We need the following: Your name, your spouse’s name, a name of a child you have and one you do not have, the name of your uncle’s aunt’s sister’s brother’s cousin’s kid’s former college roommate, a urine sample, your urine sample, and a partridge in a pear tree.

Question: What if I want to seek crowdfunding for a project that will help orphans and other children?

Answer: Well, since that would be a good idea, we can’t let you do that. There is no federal regulation yet and without federal regulation, good things may happen. We cannot allow good things to happen without federal oversight because who would reap the rewards? Small businesses, startups and inventors who actually have valid ideas or the government? Can I have a glass of water?

Question: But I have a valid idea that is only slightly cooler than 0 degrees Kelvin, will not cost much money and has the ability to help millions of people without interference from any government entity. And I don’t have a glass for your water.

Answer: Now this is just ludicrous. How can anyone expect to get anything done without oversight from the government? We have to have a hand in it! There are regulations to institute, policies to follow, lobbyists to pay and taxes to levy! And stuff!

Question: So, you are basically saying I cannot use crowdfunding because the government does not have a hand in it, and the government does not have a hand in it because they don’t have a hand in it?

Answer: You betcha!


So there you have it, what Richard and I figured out about crowdfunding and the SEC. Since we could not get a direct answer, we have decided to challenge SEC Chairman Mary Shapiro and former chairman Christopher Cox to a tag-team cage match, winner gets the right to determine how crowdfunding will be regulated. We’re negotiating the rights to put it on Pay Per View and failing that, we’re have a crowdsource funding campaign to raise money to rent a high school gym somewhere.

by Ben Baker

The SEC Goes Into SEC “Quiet Period”

In it’s continuing effort to make sure small businesses do not get all the support they need from non government sources, the Securities and Exchange Commission (SEC) announced today it will continue to delay creating rules for crowd source funding.

The federal JOBS (Jumpstart Our Business Startups) Act, passed and approved in April, requires the SEC to come up with rules governing crowdfunding. With the response time Americans have come expect from the Federal Emergency Management Agency, the SEC moved immediately to attend to other pressing matters, such as where the board of directors should have their business clothes dry cleaned.

The SEC has until 2014 to create and implement the rules. The federal health care mandate is supposed to be fully implemented in 2014. Perhaps the two will be merged to create a new class of “too small to fail” businesses which will become eligible for government buyouts.

SEC Chairman Mary L. Schapiro, who must believe SEC actually stands for South Eastern Conference, is also taking a very NCAA approach to the rule making process. Judging from the actions so far, big business is being treated like the very largest universities which only do something wrong after it’s been in the media for six weeks. Small businesses, like the small colleges under the NCAA umbrella, are ignored unless they do something to upset the big players.

To that end, the SEC announced Aug. 31 it would create classes of investors for crowdfunding. In an effort to support the valuable pulp wood tree farming lobby, the proposed rules also promised a different set of regulations for each investors. The amount of paper expected in the ensuing rules creation process drove pulp wood prices up and another 500 acres of rain forest was immediately leveled.

Writing in Venture Beat, Jason Best and Sherwood Neiss also tackled the thorny issue “general solicitation rules.” For the past 78 years, the SEC has been charged with making sure insider trading does not happen, and what a sterling record they have in that regard. The list of people charged with and convicted of insider trading over the past decade or so is certainly into the 10s of people.

Best & Niess dare to suggest the SEC lift the ban on general solicitation in crowdfunding. By offering this idea, they will be the next target of an SEC investigation and possibly be suspended from playing in any post-season bowls for the next five years. They may also get a finger viciously wagged in their face.

The duo also dares to bring up the idea of “accredited investor.” Federal law is unbelievably clear on this one. An “accredited investor” has a liquid net worth of more than $1 million or earns more than $200,000 a year. Really. That’s it. We’re not kidding.

This goes right back to the different classes of investors and the rules which will govern each class. The SEC suggests an “accredited investor” may vary depending on what, how, why, where, when and with whom an investment is made and whether or not it involved Las Vegas Showgirls , a bulk order of ostrich feathers, a jar of peach preserves and a Weedeater. It should now be blindingly obvious the SEC is fulfilling its role of obfuscation full speed ahead and damn the small businesses.

Meanwhile, a new crop of Philadelphia lawyers is sitting on the sidelines watching the SEC call plays and biding their time until they can enter the fray and sue anything that even looks like an investment, investor, small business or a Las Vegas Showgirl holding peach-covered ostrich feathers.

In this never-ending dance of rule making, the only thing that is certain is: LAWYERS WIN!

How all this will affect the future of crowdfunding and small business startup has yet to be determined. However, crowdfunding continues to roar ahead, displaying the kind of determination and grit that leads so many people to start small businesses and succeed despite government efforts to thwart their efforts. Except we mean help.

by Ben Baker