Post by jeffolie on May 31, 2012 12:18:58 GMT -6
Crowd Funding scam alert: 'may sound like a cesspool of financial chicanery and frauds', regs weak, not enforced, little company info available for reasonal 'due diligence', impulsive investors throw their money away, Billions a little at a time,
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Crowd funding fuels businesses, charities, creative ventures
" ... state regulators already have issued statements warning consumers about risks involved....Fundraisers also often pledge their products as a reward. ... Crowd-funding sites vary in how they handle money. The intersection of crowd sourcing, money and anonymity afforded by the Internet may sound like a cesspool of financial chicanery and frauds, but site operators are sensitive to the perception."
" ... Entrepreneurs and dreamers such as Sebold are flocking to crowd funding, an emerging field of finance that, by using the Internet as an efficient middleman, often manages to be both more intimate and more high-tech than traditional means of raising seed money. The idea has existed for years but is receiving renewed attention now that social media, online networks and payment technologies increasingly strip away legal, psychological and logistical barriers for money solicitations.
" ... While they get a sense of fulfillment at seeing the campaigns they support continue, donors typically receive neither a stake nor artistic/operational input. That could eventually change. President Obama recently signed a law, the Jumpstart Our Business Startups (JOBS) Act, that would allow individuals to buy equity stakes in companies via crowd-funding sites under certain rules, likely effective next year.
" ... few dollars here and a couple of hundred bucks there can add up quickly. About $1.5 billion was raised in 2011 by about 450 crowd-sourcing Internet sites worldwide, says a report by Crowdsourcing.org, a site tracking the industry. That's expected to double this year,
" ... JOBS Act brings opportunities, worries
New opportunities are emerging for those who fancy themselves cash-poor but discriminating venture capitalists. Others see a door opening for scams.
The Jumpstart Our Business Startups (JOBS) Act, signed into law by President Obama last month, contains provisions that allow startups to sell individuals an ownership stake in the company of up to $1 million on crowd-funding websites. The Securities and Exchanges Commission must draft rules for how that will work before the law goes into effect next year.
"Who are the investors for this? They are lay persons on the street. These investments have had all sorts of problems and frauds," says David Rubinstein, partner and chair of SEC practices at accounting firm WeiserMazars.
With rulemaking still ongoing, the law lacks details on how investors will be protected. But broadly, it imposes certain rules on funding websites, including a requirement that they refrain from directly handling money or securities. They must hire an intermediary, such as a bank or broker, for such transactions. The funding sites are also prohibited from making security recommendations or promoting a particular company.
The banks and brokers are required to conduct background checks of officers or directors holding at least 20% of company shares. A crowd-funding site can also act as an intermediary — and hold funds and securities— if it registers as a broker.
Because most crowd-funded deals are small in size, large brokers could be tempted "to cut corners," Rubinstein says. Smaller intermediaries may not have enough resources to meet the requirements, he warns.
www.usatoday.com/tech/news/story/2012-05-29/crowd-funding-websites/55288516/1?loc=interstitialskip
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Crowd funding fuels businesses, charities, creative ventures
" ... state regulators already have issued statements warning consumers about risks involved....Fundraisers also often pledge their products as a reward. ... Crowd-funding sites vary in how they handle money. The intersection of crowd sourcing, money and anonymity afforded by the Internet may sound like a cesspool of financial chicanery and frauds, but site operators are sensitive to the perception."
" ... Entrepreneurs and dreamers such as Sebold are flocking to crowd funding, an emerging field of finance that, by using the Internet as an efficient middleman, often manages to be both more intimate and more high-tech than traditional means of raising seed money. The idea has existed for years but is receiving renewed attention now that social media, online networks and payment technologies increasingly strip away legal, psychological and logistical barriers for money solicitations.
" ... While they get a sense of fulfillment at seeing the campaigns they support continue, donors typically receive neither a stake nor artistic/operational input. That could eventually change. President Obama recently signed a law, the Jumpstart Our Business Startups (JOBS) Act, that would allow individuals to buy equity stakes in companies via crowd-funding sites under certain rules, likely effective next year.
" ... few dollars here and a couple of hundred bucks there can add up quickly. About $1.5 billion was raised in 2011 by about 450 crowd-sourcing Internet sites worldwide, says a report by Crowdsourcing.org, a site tracking the industry. That's expected to double this year,
" ... JOBS Act brings opportunities, worries
New opportunities are emerging for those who fancy themselves cash-poor but discriminating venture capitalists. Others see a door opening for scams.
The Jumpstart Our Business Startups (JOBS) Act, signed into law by President Obama last month, contains provisions that allow startups to sell individuals an ownership stake in the company of up to $1 million on crowd-funding websites. The Securities and Exchanges Commission must draft rules for how that will work before the law goes into effect next year.
"Who are the investors for this? They are lay persons on the street. These investments have had all sorts of problems and frauds," says David Rubinstein, partner and chair of SEC practices at accounting firm WeiserMazars.
With rulemaking still ongoing, the law lacks details on how investors will be protected. But broadly, it imposes certain rules on funding websites, including a requirement that they refrain from directly handling money or securities. They must hire an intermediary, such as a bank or broker, for such transactions. The funding sites are also prohibited from making security recommendations or promoting a particular company.
The banks and brokers are required to conduct background checks of officers or directors holding at least 20% of company shares. A crowd-funding site can also act as an intermediary — and hold funds and securities— if it registers as a broker.
Because most crowd-funded deals are small in size, large brokers could be tempted "to cut corners," Rubinstein says. Smaller intermediaries may not have enough resources to meet the requirements, he warns.
www.usatoday.com/tech/news/story/2012-05-29/crowd-funding-websites/55288516/1?loc=interstitialskip