Title III: High Risk, Low Reward

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3d-columnsWe’ve long since touted the changes coming for Title III and the Crowdfunding industry and, while the industry is seeing progress, there have been those who criticize the current set up. Seedrs CEO, Jeff Lynn went so far as to call it unworkable. Today we will go over what the T3-naysayers are complaining about in regards to the updates to this important part of the Jobs Act.

The current issues can essentially be summed up with the phrase, “high risk, lower chances of reward.” In it’s current iteration, Title III places a heavy burden on the companies seeking to raise capital in regards to the time it takes to raise it and the expenses involved. It is to the point that it looks like equity crowdfunding under these rules will be more or a last resort, as it will be more expensive than other, more traditional methods.

“Issuers will find themselves with bills in the tens of thousands of dollars right out of the gate to pay for legal and accounting services—and will then have to spend at least a couple thousand dollars after fundraising to comply with ongoing reporting requirements.” – Crowdfund Insider

Not only that, but it: gives insufficient protection to the investors if it actually succeeds, restricts the marketing strategies companies can use (including disallowing any testing the waters), and still has the “99 investor problem”, among other issues. Fortunately, Congressman McHenry has already put forward legislation, aptly named the Fix Crowdfunding Act, to make the industry run a little more smoothly. Right now, American Crowdfunding is just too restricted, unlike our European cousins, to succeed to the lengths its dreamers are hoping for. On the plus side though, we are finally getting non-accredited investors involved.

 

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Social Media Strategist, REIFA

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