View Full Version : Attention SEC: Equity Crowdfunding Pales in Comparison to Penny Stock Fraud.

02-22-2013, 10:55 AM
Attention SEC: Equity Crowdfunding Pales in Comparison to Penny Stock Fraud.
By Brian Krassenstein

As we sit here only about a month and a half away from the one year anniversary of Obama's JOBS Act, which promised to legalize equity crowdfunding for non-accredited investors, we have yet to see much progress at all from the SEC. Despite a deadline of December 31st, 2012 which was imposed on the SEC to set forth rules regulating the Equity crowdfunding industry, this deadline has come and gone, without much of a peep from the Commission.

Equity crowdfunding promises to ignite the start-up arena, allowing anyone with an idea, to raise funds through an equity crowdfunding platform like Rockethepost.com, Crowdcube.com, or Seedrs.com. Why was it included in Obama's JOBS act? That's simple, it will create jobs, and likely lots of them, right here on American soil. The problem is, that other countries, particularly in Europe, are ahead of us in relaxing regulations on this form of start-up funding. The Securities and Exchange Commission has dropped the ball, allowing foreign nations to get a step ahead of us, creating unforeseen future circumstances within the worldwide funding arena. It's not too late though for America to come back and lead the way in this new and exciting means of funding.

Why are we sitting here, nearly a year after the Jobs Act was signed into law, still wondering if the SEC will come up with the regulations and guidelines we were promised, sometime this year? That's a complicated question, however it somewhat has to do with the the Head of the SEC, Mary Shapiro, quitting on December 14th, leaving the commission is a bit of disarray. The main reason though, in my opinion, is that the SEC simply wants to control this particular investment arena too tightly. They magnify the dangers of equity crowdfunding, and thus want to overprotect the public from the possible scams that may emerge within the industry.

The problem is, however, that there are so many more dangerous schemes out there, particularly the under regulated Pink Sheet and Over The Counter penny stock markets. Every year dozens of Over the Counter, and Pinksheet stocks swindle investors out of millions of dollars. The CEOs of the companies set up base outside the US, put out a ton of shocking press releases, and then dilute shares on the open market, raising hundreds of thousands, if not millions of dollars which go directly into their own pockets. Even if the SEC decides to delist a stock, the stock continues to trade on the Grey markets, allowing more people to continue to be ripped off. Take for example the recent scam, Southridge Enterprises, Inc. Ticker: (SRGE). The company put out press release after press release claiming to own the rights to a mine with over $300 million in gold and other precious metals. They even claimed to be partnering up via a joint venture with a large mining company on the NASDAQ, all the while increasing their authorized shares, and dumping them into the hands of people who believed their story, on the open market. The SEC was made aware of the lies that SRGE was putting out, however it took them months before delisting their stock, and sending it directly to the Grey markets. The problem is, to this day the stock still trades, the company's CEO is still out there, and people continue to be fleeced out of their hard earned money.

So what's the point of this Penny stock story? Well, The SEC is so worried about regulating the Equity Crowdfunding arena, yet they let dozens of scams every year continue on the lower tiers of the stock market. Equity crowdfunding has it's risks, but the rules set forth in the JOBS Act signed in April of 2012, mitigate almost all of these risks. There are far worse concerns the SEC should have within other markets, then they do in the equity crowdfunding Market.

02-22-2013, 11:33 AM
Funny thing. The President of the United States is reckoned by many to be the most powerful politician in the world. Yet, to me he seems virtually powerless. He wants to bring in tighter gun control but he won't be allowed to. He's got this JOBS Act going, yet total inertia from those whose job it is to see it gets implemented.

Who runs the country?