When President Obama signed the Jumpstart Our Business Startups Act in April 2012, he hailed it as "exactly the kind of bipartisan action we should be taking in Washington to help our economy." Well, maybe.
Some JOBS Act provisions kicked in right away. "Emerging growth companies"—those with under $1 billion in revenues—are exempt from many reporting provisions of Sarbannes-Oxley. And so Twitter, for example, only had to show two years of audited results (instead of three) in its IPO filing. And private companies can now have 2,000 investors, up from 500, before they have to file annual reports with the Securities and Exchange Commission. Less information is never better.
The SEC, however, waited almost a year and a half to implement a general solicitation rule allowing companies as well as private equity and hedge funds to advertise to a mass audience during their fundraising—though individual investors still need to be accredited, meaning $1 million or more in net worth or $200,000 in individual income. Of course, no self-respecting hedge fund or private-equity firm will advertise, for the same reason law firms Skadden Arps or Wachtell Lipton don't damage their brand running TV ads like personal injury lawyers Schlock and Skeeve.
In October, the SEC finally put out a "crowdfunding" rule that allows anyone to "angel" invest in startups. Sort of. There are annual caps of 5% for those making under $100,000 a year and 10% for those non-accredited making over $100,000. This is government paternalism trying to limit your downside. Yet there already are investing platforms like RockThePost and AngelList that hopefully weed out most fraud. In any event, government should not be telling people how to, or if they can, invest.
But just because you can invest doesn't mean you should.