Securities Regulation: USA-SEC Adopts Rules to Permit Crowdfunding

Gassner's picture

Dear Readers,

The US Securities Exchange Commission has issued recently press release regarding equity crowd funding and its regulation:

"Washington D.C., Oct. 30, 2015 —
The Securities and Exchange Commission today adopted final rules to permit companies to offer and sell securities through crowdfunding. The Commission also voted to propose amendments to existing Securities Act rules to facilitate intrastate and regional securities offerings. The new rules and proposed amendments are designed to assist smaller companies with capital formation and provide investors with additional protections."

Equity funding is discriminated threefold in finanical markets despite most people assume that a market economy would leave choices to market participants. The three key problems are: 1) Risk weighting of equity finance a multiple higher than debt finance, thus making it unattractive for banks to provide equity finance and consequently destabilizing economies with excess debt. 2) Tax deductibility of interest expense. 3) Entry barriers to the securities markets to raise equity.

The new regulations is a step forward to ease problem circle number three. And one could only hope that other regulators take competitive steps so that their small and medium sized companies will have access to the upcoming equity crowd funding markets and thus increase financial stability and growth.

The two other problem areas are widely ignored and may cause follow on crises.

Best regards,

Michael Gassner