Imagine a job that openly declares what you won’t do
No Federal agency is more afraid of free market capitalism, you know, the open ability to acquire (own) the means of production (what Marx called capitalism). The SEC is far more active in squashing American entrepreneurs rather than aiding their formation and growth. Why, because investing in start-ups is risky. Yet there is some hope in sight as the SEC explores new no-action letters stating that they’ll leave a few elements of free market capitalism alone.
Hope is in sight as the SEC explores new no-action letters stating that they’ll leave a few elements of free market capitalism alone.
The SEC works like this – let’s say I want to showcase 20 cool new start-up companies who are committed to launching businesses in downtown Saginaw. The companies have hopes of finding some investors who will help us raise seed capital. I think there are investors who think local investing pays additional returns through the constructive impact on the local economy so the thought of hosting such an event is definitely a good one!
The SEC considers this “general solicitation” of a financial transaction which can lead to investors being defrauded or at least of having extremely disappointing investment outcomes – sort of like investing on Wall Street. Now I do understand that most everybody who had their retirement savings under the safekeeping of SEC regulated Wall Street firms lost their modest retirement savings while those protecting their investments took home tremendous fees and bonuses. I do understand that if too much money were invested directly and locally, that irreparable harm could come to some bonus pools at big financial houses so the SEC does have reasons to intervene. Still, is helping create jobs in Saginaw really that threatening to Washington?
I digress…back to our start-ups in Saginaw. We want the startups to present their business plans to perspective investors who prudently understand that such investments might be good diversification from Wall Street markets. To do this the SEC has, up until now, required complex, time-consuming and costly reporting that keeps these events from happening. However, under the latest set of rules we can start having these investor events.
Two years ago Congress passed, with bipartisan support, the JOBS Act which required the SEC to loosen up on start-ups and to make it easier for them to attract seed capital. They have done just the opposite adding costs and complexity to financing our start-ups. In Michigan alone, last year’s total venture investing fell by over 40% and the rate of start-ups across the country shows no sign of recovery.
Now, to make the JOBS Act work we need a major Federal agency to step up and say they’ll leave us alone if we try to Jump-Start Our Business Start-ups (that’s where the law got its name so it really isn’t that radical of an idea).
Who knows, maybe other government agencies will catch on to this “no action” approach to government.