The emerging prospect of equity crowdfunding, something early-stage companies have long gunned for as a cheaper alternative to IPOs, is currently perched on the lip of becoming reality in this country. And that’s sent lawmakers keen to regulate it scrambling in equal measure with caution-spouting fusspots worried about its impact on our collective economic well-being.
There’s actually been lots of action on this front of late. Saskatchewan has implemented crowdfunding legislation, with its Financial and Consumer Affairs Authority declaring that small businesses and startups in that province are free to sell stakes in their companies to residents through the Saskatchewan Equity Crowdfunding Exemption.
Ontario and BC, meanwhile, are hammering out their own proposals, and the Ontario Securities Commission’s prospectus crowdfunding exemption is expected to be published in the first quarter of next year.
Those that object to the concept say it throws wide the potential for fraud. In a letter penned to the Saskatchewan Financial and Consumer Affairs Authority, the Federal Accountability Initiative for Reform Canada expressed “grave concerns” that the FCAA might not regulate equity crowdfunding portals.
“In our view,” goes the note, “regulation of portals is essential to providing a minimal level of consumer protection to potential crowdfunding investors ... Permitting equity crowdfunding transactions through unregulated portals would be a complete abandonment of the FCAA’s consumer protection mission.”
At FundRazr, we believe these naysayers embrace their stance on investor protection a bit too rabidly. A company owner should be able to sell shares in his operation to whomever he pleases, thankyouverymuch, and to do so without benefit of a government-enforced intermediary (whose participation in the affair is expensive thanks to all the legal protections these anxious CEOs would have to put into place to avoid getting sued).
Evidently, these worrywarts would have us exchange the long-entrenched notion of “buyer beware” for a nanny state on a blind mission to protect the apparently at-risk rest of us.
We can only return accountability to our lives by requiring people to think carefully about what they do—and then leaving them with the sole responsibility of their choices.
Because, first up, if someone is really worried about the risks of crowdfunding, they need simply not play. No one is forcing anyone to buy shares in companies listed this way.
And next, yes, there will be fraud. Just because we have cops doesn’t mean we don’t have bad guys. But in a civil society, laws come with punishments. Let’s marry crowdfunding developments with a tweak to the way we enforce existing regulations and discipline white-collar crooks.
Such guideline-generating attention can only be a good thing. Equity crowdfunding will help businesses raise the capital they need and have been unable to obtain because of tightening credit. It will also allow more people to invent and create and build and develop in the greatest wealth-creating engine we have: small business. Access to the promising and fruitful investment opportunities their efforts generate should not be the domain of just the few, rich-already, accredited investors.
Our FundRazr platform vision for 2014 is to enable businesses to access funding across the full spectrum of crowdfunding models including donations, rewards, equity and lending. Canadian entrepreneurs will validate their concepts, offer pre-orders, build community and fundraise with our crowdfunding-as-a-service technology creating wealth and strengthening the Canadian economy.