Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, September 25, 2014

Groshoff, Urien & Nguyen on Crowdfunding

David Groshoff, Kurtis R. Urien, and Alex Nguyen have posted Crowdfunding 6.0: Does the SEC's FinTechLaw Failure Reveal the Agency’s True Mission to Protect — Solely Accredited — Investors? on SSRN with the following abstract:

This Article builds on our prior research employing case studies — either singly or globally — to serve as the analytic to newly trending matters in law and entrepreneurship. Specifically, this Article serves as the third installment of our trilogy in FinTech law, analyzing potential consequences of the Equity Crowdfunding portion of the JOBS Act, including the Securities and Exchange Commission’s (SEC’s) proposed regulations regarding equity crowdfunding for non-accredited investors.

This manuscript identifies that the current statutory and regulatory regime governing FinTech crowdfunding platforms is inequitable to the vast majority of the U.S. population. The manuscript then employs two case studies — one real and one hypothetical — to illustrate that the SEC’s deliberate indifference to, or astounding technological incompetence regarding, applying legal regimes to emerging technology and economic growth. These case studies evidence pain points faced by both potential investors and investees and in both the equity and debt portion of an enterprise’s capital structure.

Our thesis concludes that either the SEC is woefully classist in favor of the proverbial “Top 1%,” or the agency is sadly incompetent in understanding the needs of entrepreneurs, people with small amounts of investment capital, and congressional mandates imposed on the SEC. The manuscript proposes interpretive, administrative, and congressional alternatives that we believe better comport with the intent of the JOBS Act. Despite President Obama’s August 2014 pronouncement that the business community complains about regulation, this manuscript turns the president’s logic on its head and demonstrates that the business community and the U.S. economy have suffered because of the lack of congressionally mandated regulation by the SEC.

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