Is Crowdfunding Bad for Investors?
(2014) 55 Canadian Business Law Journal 215-229
Posted: 8 May 2015
Date Written: 2014
With the passing of the Jumpstart Our Business Startups (JOBS) Act, U.S. companies and their investors will soon be able to participate in "equity crowdfunding" (ECF), a process that allows individuals to buy equity securities in a company over the Internet. After assessing arguments both for and against ECF, this article concludes that the benefits of ECF, on the whole, outweigh its disadvantages. ECF provides small and mid-size companies with an economical system for raising capital, decreases costs incurred to invest in these companies, offers investment opportunities to a greater population, and pairs companies with interested investors. The article makes some proposals for the regulation of ECF, such as requiring the distribution of securities to occur through portals that are registered with the securities regulator and it briefly addresses the Ontario Securities Commission's recently proposed crowdfunding prospectus exemption.
Note: Abstract reproduced by permission of Canadian Business Law Journal Inc., and Canada Law Book, a division of Thomson Reuters Canada Limited.
Suggested Citation: Suggested Citation