Crowdfunding has so far been known as a method of audience fundraising through donations. This method of crowdfunding keeps growing and in the near future will help the startup companies to obtain funds. Startups selling their shares to Main Street investors. Main Street identical with financial market, financial institutions, or large companies.
Securities and Exchange Commission (SEC) announce that this adoption will implement regulations that has been agreed in 2012. The regulations has approved to open the door of opportunity to crowdfunding in security sector. For years before, investors have a chance to take advantage from companies that can develop themselves such Twitter, Instagram, or Uber.
But this method also contain high risk, considering possibilities of failure in startup companies. Around half of small businesses closed within five years. Some critics also mentioned possible fraud. New SEC regulations emphasize “will not prevent fraud mode” that could increase conventional online scam. This is described by Law Science professor at The University of Mississippi, Mercer Bullard. He himself encourage mutual fund investment.
To protect investors, crowdfunding security can only be offered through achieved through foreign brokerage firms or new internet portal funding registered in SEC. Before carried out voting, SEC Chair Mary Jo White stated that SEC staffs will immediately start supervision on the market development.
SEC will start doing assessment in companies’ type that may offered to use this new crowdfunding. Then decide how far this companies’ obedience against new regulations. Next, SEC will assign a new regulation in raising capital and also provide security for investors.