Beware of fraud. While the SEC analysis failed to identify any civil complaints or administrative proceedings filed against Regulation Crowdfunding issuers or intermediaries, the SEC notes that, “As with other investments, there is no guarantee that crowdfunding investments will be immune from fraud.”
The SEC added, “While factors such as the public nature of crowdfunding campaigns, the requirement to use an intermediary, and various other requirements of Regulation Crowdfunding offerings may have served as deterrents to potential misconduct, we cannot distinguish the low incidence of observed potential misconduct from the possibility of high latency of potential misconduct among crowdfunding issuers and intermediaries.”
Potential For Growth
If traditional crowdfunding is included, crowdfunding globally is a $7 billion industry this year, according to Statista, and it’s expected to grow to about $12 billion by 2023.
Regulatory changes, such as higher funding limits, could also spur growth. Consider that in 1978, only $216 million was committed to venture capital funds in the U.S. After regulatory changes, a decade later the amount committed grew to $3 billion.
Will equity crowdfunding experience similar growth? Investors who think so have a chance to get in early.
John Bowens is a national education specialist and retail sales manager for Equity Trust Company, and a national speaker. He can be reached at [email protected].