The SEC’s investor advisory committee voted unanimously today to ask the agency to stiffen its proposed crowd-funding rules.

One of the concerns is that unregulated crow-funding campaigns will lure retail investors into business start-ups, which are historically among the riskiest of investments, says committee member Barbara Roper of the Consumer Federation of America.

Crow funding also drives up the hype surrounding an investment, enticing consumers to invest more of their money, she added.

Even investors who get in on the ground floor of the next Google may be disappointed by the returns on their money due to dilution of their shares in hot companies and lower than expected profit.

Committee member Stephen Holmes, chief operating officer for venture capitalist InterWest Partners, said illiquidity and dilution will be factors in 99 percent of crowd-funding offerings.

Among its recommendations, the committee wants caps on total crowd-funding investment to be based on a percentage of the lower of an investor’s income or net worth (excluding home equity). The SEC proposal would allow the cap to be applied to whichever is greater.

The caps would be 5 percent for $100,000 and 10 percent above the figure. With the SEC’s proposal, a person with an income of $150,000 and a net worth of $25,000 would be allowed to invest $15,000 every 12 months. The same cap would apply to a person earning $25,000 with a net worth of $150,000.

With the IAC’s recommendation, the lower base would limit the same person to only $2,000 in crowd-funding investments per year.

Noting that many investors don’t know how much they are worth, the advisory committee wants the SEC to require intermediaries to have an interactive online tool that the public can use to determine their crowd-funding investment limit.

Meanwhile, committee member Damon Silvers, AFL-CIO associate general counsel, criticized the deregulation of crowd funding.

“It will cause a lot of problems that are unmanageable—a deregulated market place for investors with no sophistication,” Silvers said.