SEC Files Its First Crowdfunding Complaint
The SEC still hasn’t passed regulations governing crowdfunding, but
that hasn’t stopped companies, CEOs, and financial professionals
from using the impending practice to increase their bottom lines.
Peterson allegedly told investors he was planning a stock offering that
would render profits of up to 1,300% over 10 years by using crowdfunding
to raise billions of dollars from the general public.
“The JOBS Act is intended to help small businesses raise capital,
not to legalize fraud or give unscrupulous entrepreneurs a right to make
false claims to fleece investors,” Michael S. Dicke, associate director
in the SEC’s San Francisco regional office, said in a statement.
The complaint against Peterson is the first SEC complaint filed that accuses
someone of using the JOBS Act to defraud investors. It isn’t the
first crowdfunding complaint filed by the country’s regulators, however.
Massachusetts Commonwealth Secretary William Galvin filed two of the nation’s
first crowdfunding-related charges in December 2012. In the lawsuits,
the state securities regulator accused two out-of-state oil and gas companies
of illegally selling
private placement securities to Massachusetts investors. Gavin said he hoped the lawsuits
would influence the SEC’s final rules over crowdfunding.
“I support rules that allow early-stage companies to raise capital
more easily,” Mr. Galvin said in a statement. “But I would
urge the Securities and Exchange Commission to adopt meaningful and effective
'bad actor' rules that will
disqualify securities law violators, brokers with revoked licenses and
other fraud operators from using these exemptions from the securities registration requirements.”
Though the JOBS Act was passed in 2012,
SEC officials have said it’s impossible to set a date for when rules
governing the practice (and crowdfunding) will be ready.
We have "a lot of learning to do,” David Blass, chief counsel
for the SEC’s division of trading and markets, told The Business Journals.
In the meantime, let’s hope the commission continues to go after
unscrupulous advisers and brokers who use the Act to cheat investors.
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