SEC Pushes Capital Formation Innovation

March 9th, 2015

Last week, Securities and Exchange Commission (SEC) Commissioner Kara Stein delivered a speech before the Stanford Law School.  During the speech, Commissioner Stein called attention to the need for further innovation in developing new forms of capital formation in the United States (US).  She said the SEC was grappling with how to “continue to facilitate innovation as business models are disrupted, financial markets change, and technology evolves.”

Currently, venture capital is the most common form of capital formation, however, as Commissioner Stein pointed out, it “may not be an option for every company,” with a limited number of venture capital firms in the market.  Accordingly, the SEC is examining other forms of capital raising, including Regulation A+, crowdfunding and regional exchanges.  With respect to crowdfunding, however, Commissioner Stein said the agency had concerns with its potential risks such as fraud and a lack of credibility.

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