New Advocacy Group Representing Online Investment Platforms Provides Regulatory Fixes to Address Investment Crowdfunding Shortcomings
July 10, 2019 (Investorideas.com Newswire) The Association of Online Investment Platforms (AOIP) has published a series of policy recommendations designed to improve the online capital formation marketplace by fixing existing flaws in crowdfunding rules.
Earlier in the year, the AOIP published a Code of Conduct for online investment platforms as the group seeks to help foster a robust crowdfunding industry in the US.
The AOIP is a newer advocacy group formed in 2018. The founding members consist of several of the most prominent crowdfunding platforms in the US, including; SeedInvest, Republic, Microventures, and NextSeed.
The group hopes that, over time, other industry participants will join and support their message of facilitating capital formation for promising early-stage firms while providing promising investment opportunities not just for the rich, but everyone.
The AOIP’s mission is to build a sustainable online investment industry that democratizes finance for everyone.
The AOIP states that this mission can only be accomplished if each of the three constituent parties in a securities crowdfunding round finds value and success. These three constituent parties are issuers, investors and platforms.
If one party does not see value in the process, in the long run, they will all fail.
The policy position paper comes at a time when the Securities and Exchange Commission (SEC) is in the midst of a regulatory review.
The SEC is seeking feedback on regulatory "harmonization" and how the capital formation ecosystem can be improved. The AOIP position paper is a basis for what the Association seeks to accomplish either by influencing the SEC or encouraging Congress to act.
AOIP Chair, Youngro Lee, who is CEO of NextSeed commented on the AOIP position paper:
"We hope that the AOIP can help further the public dialogue and better inform legislators and regulators to make a positive difference in this industry."
An outline of the AIOP Policy Position Paper is as follows:
- Increase the funding cap of Reg CF to at least $10 million for issuers.
- The definition of an accredited investor must be fixed to recognize investor sophistication
- No investment limits should be placed on accredited investors under any private offering exemptions
- Investment limits on non-accredited investors should be set as a per investment cap - not a cumulative cap
- Investments under Reg CF should be calculated as a function of income OR net worth
- Special Purpose Vehicles (SPVs) or Nominee structures must be allowed for issuers
- Testing the waters should be added to Reg CF
- Flexible compensation should be allowed for platforms as current restrictions make it extremely difficult to facilitate small offerings profitably
- Regulated platforms should not be forced to bear an undue burden of issuer liability
- Audited or reviewed financials must be removed for issuers raising less than $1 million
- 12g requirements must be eased as companies with many shareholders should not be compelled to become reporting companies
- Reporting requirements should reflect the type of security of context of the company and the offering
- An Innovation Tax Exemption should be developed for Reg CF that benefits investors.
The founding Directors of the AOIP have each signed their name to this document. They include:
Bill Clark - CEO of Microventures
Kendrick Nguyen - CEO of Republic
Ryan Feit - CEO of SeedInvest
Youngro Lee - CEO of NextSeed.
The AOIP has already met with SEC staff and multiple offices on Capitol Hill advocating on behalf of the crowdfunding industry.
The Association sees a growing awareness of the importance of online capital formation and what it can mean for both issuers and investors.
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