Obama Jobs Act
It hasn't even gone into effect yet, and the state and the Securities and Exchange Commission are already issuing warnings about one provision of the president's new JOBS Act. A portion of the legislation recently signed lets average Americans become venture capitalists by creating new rules on "crowd funding." (AP Photo/file)

Crowd funding warning from Washington and the SEC

BY Kim Shepard  on May 15, 2012 @ 4:35 pm (Updated: 8:45 am - 5/16/12 )

It hasn't even gone into effect yet, and the state and the Securities and Exchange Commission are already issuing warnings about one provision of the president's new JOBS Act. A portion of the legislation recently signed lets average Americans become venture capitalists by creating new rules on "crowd funding."

So far, websites like Kickstarter have let individuals donate money to start ups trying to get off the ground. Under the JOBS Act, you will be able to make a true investment and gain capital in the company.

There is just one problem. It will be at least next year before the provision goes into effect. The SEC has been given a nine-month deadline to create rules and regulations to make it happen.

"Any of these offerings that pretend to be part of the JOBS Act or something like that are wrong. They're illegal," says Bill Beatty, the Securities Administrator at the Washington State Department of Financial Institutions.

Beatty says until he sees how the SEC sets up the new "investment portals" required for crowd funding, he is not sure what the state might be in for.

"We are concerned because state regulators are preempted from regulating these new crowd funding offerings, so it's going to entirely be done at the federal level. And, we've all heard and seen the difficulties the SEC is facing right now," says Beatty.

There is one group of investors who is already dipping their toe into the crowd funding pool in a pretty big way. They are known as "angel investors."

Generally, a company cannot sell stock unless it registers the stock and has an initial public offering. Exceptions are made for wealthy, private investors who are accredited.

Local attorney William Carleton works with the Angel Capital Association. He says angels are different from typical venture capitalists because they often do not expect to see much of a return on their investment.

Angels are split over whether the new rules on crowd funding are a good idea.

"Some don't think that it's something the general public ought to engage in because there's too much room for fraud. These kinds of start-up ventures are the riskiest, and most of them end up failing, and so people will lose their money," says Carleton.

On the other hand, Carleton says other angels think crowd funding should be open for anyone to invest.

While angels like to bolster new companies in the fields that interest them, often the electronics industry, the Internet and healthcare, Carleton thinks most individuals will be more interested in owning a piece of a local business they can visit everyday.

There is at least nine months before the new rules can be implemented. If this all sounds interesting to you, Beatty says you have plenty of time to do your homework.

"The same old maxim applies. Investigate before you invest. If it sounds too good to be true, it probably is. Be careful and thoughtful with what you do with your money."

And, Beatty adds, it is never a good idea to send a cashier's check to Nigeria.

Kim Shepard, KIRO Radio Reporter
Kim Shepard is a news anchor and reporter for KIRO Radio and the office optimist. She's energetic, quick to laugh and has a positive outlook on life.
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Comments (8)


  • Add A Comment

  • It's me! Ha ha! wrote...
    So now the Dear Leader is asking for contributions!
    May 16, 2012 5:36 am
    How many TRILLIONS of dollars has this Felon stolen from us taxpayers and now he ask for more? How many so called Jobs stimulus programs (Failed)have we paid for?

    I cannot wait for November!

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • ron prevost wrote...
    Let me see now - there is not enough benevolence
    May 16, 2012 5:54 am
    SOOOOOO, let's entice in greedy (but dumb) people with money. .. Now I might be wrong, but wasn't this scam invented a while back - say about the time MONEY was invented - and perfected by a fellow named Ponzi a bit later ? ............ But, HEY, might work with the blessing of Oz. And you are assured not to go bust until after the elections.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • dvdrafael wrote...
    not so bad
    May 16, 2012 5:48 am
    After the last four years of Obama's economic policies, Nigeria doesn't look so bad.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • artimus wrote...
    It's me! Ha ha!
    May 16, 2012 6:59 am
    I think it's going to be a blue Christmas for you, HaHa.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Ravensfan wrote...
    Obama Economics
    May 16, 2012 7:27 am
    Obama is at best incompetent and at worst is trying to implement a complete government takeover of the economy. Socialism has never worked and just have to point at Europe as a prime example. Does he want us to look more like Greece or Cuba? Maybe the guy is smarter then we give him credit since he would have unlimited powers in the event of a major crises. Let's hope for major change in November.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    I think it's going to be a blue Christmas for you, HaHa
    May 16, 2012 10:45 am
    Artie you will not be enjoying a RED Christmas.

    At least not in this nation!

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • mnpat wrote...
    What was it they said about the O-Guy health care law
    May 16, 2012 10:46 am
    Pass it and then we will find out what's in it...........he** of a way to lead a nation!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • HPD 5-0 wrote...
    Don't worry.
    May 16, 2012 4:57 pm
    If Owebama gets re-elected their wont' be an economy left or a stock exchange for that matter...so the SEC will be useless. You have nothing to worry about...
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • { "Thumbs Up":"1","Thumbs Down":"-1" }