As many of us realize, the government in general and the U.S. Congress specifically are slow to take action. And even once action is taken, refinement is often needed before it becomes effective. This how it has been with the American Jobs Act of 2011. Originally submitted to congress by President Obama in September of 2011, it was passed into law in April of 2012. Implementation and refinements have been occurring ever since.
Crowdfund Intermediary Regulatory Advocates (CFRIA)
CFRIA has become a nonprofit leader as an advocate setting standards related to the new and developing crowdfunding industry. CFRIA (www.cfira.org) was established following the signing of the Jumpstart Our Business Startups (JOBS) Act. It was formed by the industry’s thought leaders who pioneered the first Crowdfunding Act to serve as advocates and lobbyist for the industry.
CFIRA works alongside the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other governmental and quasi-governmental entities to help establish rules, industry standards, and best practices.
The membership of CFIRA is composed of Intermediaries (Crowdfunding Platforms and Broker Dealers), Investors, Issuers, Third Party Service Providers (such as technology vendors, attorneys, accountants), and other crowdfunding related service providers.
Major Changes Coming
On May 16th, crowdfunding will go from policy vision to a full funding reality with the ability for unaccredited investors to invest in private offerings. This is an important landmark because it opens crowdfunding to millions of new investors. This is the culmination of five-years worth of historic financial policy change that will forever alter the small business and investment landscape.
Previously only the wealthiest investors (accredited) were able to participate in crowdfunding. There are federal regulations defining who can be accredited such as having a net worth exceeding a million dollars or an individual annual income exceeding $100,000. There are additional requirements at most state levels.
Beginning May 16, unaccredited investors will become eligible to participate in Crowdfunding. Crowdfunding isn’t only about the real estate business. Many other business opportunities will benefit from crowdfunding capital and investment pools of money that will be made available. The inclusion of unaccredited investors is going to substantially grow the amount of money available for well-planned investment opportunities. Much of this will be in the real estate industry.
In light of the ongoing tight banking industry qualification standards, this relatively new source of funding is likely have a profound affect on the banking industry as well as many small businesses. It’s too soon to predict all of the affects that are likely to occur. However, if banking standards for small businesses aren’t loosened, banks are likely to find that the majority of their investment opportunities are limited to major corporations. Banks now have real competition for funding. This includes everything from individual mortgages to small business loans.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for seven years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.