Our regular readers do a great job of ensuring I never am at a loss for timely column ideas. Often, the emails and reader comments posted on VenturePopulist.com are angst-ridden rants and rages against the machine; such was the pointed reaction to the January column, “The Good, The Bad and Reg D,” which elicited an unusually vocal and vehement reaction to the impact of private placement regulatory encroachment on the entrepreneurial and startup ecosystem, and sustainable new job creation.
The column chastised the Securities Exchange Commission’s inability to recognize the critical need to enable and facilitate exempted Reg D financings that are responsible for an estimated 30,000 to 50,000 startups and early-stage businesses each year from the hundreds of millions of dollars in fraudulent limited partnerships transactions that regularly emerge in the headlines.
To the contrary, recent legislation implied and enacted under Dodd-Frank and recent SEC musings suggest that regulators still have a baby-bathwater separation anxiety: Their appropriate concern over fraudsters bilking millions from investors in limited partnership schemes overreaches into regulatory encroachment that has a dampening effect on new business and job creation.
Many of the comments I received from readers articulated the strong position that unregistered financial intermediaries should be allowed to receive finder fees for introducing capital to early-stage businesses.
The SEC recently released the final report on the 29th Forum on Small Business Capital Formation that was held in Washington, D.C., in November of last year. The annual forum is mandated by the Small Business Investment Incentive Act of 1980 to provide a “platform to highlight perceived unnecessary impediments to small business capital formation and address whether they can be eliminated or reduced,”—a noble and worthy pursuit by any measure.