Legislators Still Concerned about Crowd Funding

Extracted 05MAR2012 from http://www.smallbusinesscrowd.com/news/finance-und-insurance/despite-populari...

...under current federal and state securities laws, crowd funding in exchange for an economic interest in the issuer is currently impermissible; thus, crowd funding has failed to grow as a capital raising strategy. Three bills were, however, recently introduced in the Senate aimed at relaxing outdated rules concerning the exceptions available to issuers under Section 4 of the Securities Act of 1933.

The SEC advisory panel, which urged U.S. Securities regulators to update existing rules, however, raised concerns with crowd funding, despite receiving support from President Obama and Congress. "This is just an opportunity for fraud in the extreme," said committee co-chair Stephen Graham, who advises on securities offerings as co-chair of Fenwick & West's Life Sciences Practice.

...Despite the risk on the side of the investors, which essentially comes with most investments, crowd funding has effective and popular among art projects via such popular funding sites as WeFund, Sponsume, IndieGoGo and Kickstarter. Crowd-funded projects do not just merely provide capital, they also provide a ready-made fan base upon completion of the project. Hopefully, soon-to-come changes in legislation will allow entrepreneurs to tap into this form of raising capital.