crowd444Traditionally, when an individual has wanted to start a new business endeavor, or to fund a project for which they didn't have the funds, then they were required to seek out (and be approved) for a loan from a financial establishment. For some, this method isn’t a viable option, and many never see their dreams come to fruition. Now, Crowd funding websites (like Rock The Post and Kick starter) have helped to change that by enabling people to directly help and fund others whose projects they believe in. This allows individuals to orchestrate the funding of projects which individuals voluntarily support. However, the SEC is looking to dictate some new rules about the exchanges.
The internet has enabled the people to help one another on a wide and personal scale, in quick and easy ways; good ideas and good information on the internet goes a long way. Crowd funding has been the natural and voluntary progression of people being able to help one another on a large-scale, to raise money or share information very quickly via the internet.
The government by definition isn’t in favor of competition, even when it comes to voluntary and peaceful exchanges. According to new regulations set by the Securities and Exchange Commission (SEC), those who fund projects via crowd funding campaigns will have to have to pay hefty fees, and meet rigorous regulations in order to see their project carried out.
The new legislation will require that the selling of crowd funding securities occur on officially sanctioned and registered websites. The websites that will be hosting the transactions are referred to as “funding portals” or “broker dealers”, and to be accepted as legitimate they must register with the SEC and Financial Intermediary Regulatory Authority (FINRA). New rules stipulate that investors are to have access to a business plan, transparency of proceeds earned, and to undertake a valuation of the company, among other things. Throughout the endeavor, the government is there every step of the way to make sure that they get a cut: the project administrators will be required to pay costs for completing various required documentation, retaining professional services and so on.
In the SEC’s new cost/benefit analysis, they examine the success of fees: having to pay websites for transactions, the compliance cost for filing forms, and cost for a Certified Public Accountant (CPA) review or audit which can cost over $100,000. For projects that aim to raise less than $100,000, compliance fees are going to eat up from anywhere between 13% to 39% of all money raised. For projects over $100,000, but less than $500,000, the fees lower to about 8%, and for funding projects over $500,000 but less than $1,000,000, the fees are 7.66%. In a voluntary exchange that shouldn't have anything to do with the government, the government is once again forcing its involvement, and attempting to cripple those who are raising charitably, in the aim of designing new solutions to world problems, and other projects.
There are going to be risks associated with every exchange in the market that we make, but it is our responsibility as consumers to make sure that we are making an informed one. To help us do that, websites who host crowd funding projects (like Kick starter) have strengthened their verification methods, as well as their funding processes in order to provide more information to the consumer, allowing them to make informed decisions about where they want their money to go. At the same time, some profit oriented endeavors using the systems should have methods of keeping track of, and giving investors access to, the money they invest.
Crowd funding has given rise to dozens of small companies, and funded numerous humanitarian endeavors. It has even being applied on a smaller scale, students crowd funded their own solar-powered classroom, it has helped people to pay for medication, or assist in bills or their rent. It’s direct action, people helping other people, and  it’s inspiring because the donations are people saying they care: it’s saying that they believe in them.
With these new regulations, the government is going to prevent people from helping others who are in desperate need, when they don’t have the means to get approved from any financial institution: the government itself isn’t helping to solve their problem. The last resort of the people is always to turn toward their fellow-man for help, why is that an exchange the government is so intolerant of?