In April, President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law, a bill to help small businesses and startups access financing, especially through online crowdfunding.

"Simply, the JOBS Act will make funding more accessible for startups by allowing non-accredited investors to participate in the funding rounds, and this alone, I believe will be the main factor driving the increase in new companies being founded," Tanya Prive, founder of Rock The Post, a social networking platform for entrepreneurs to fund and swap resources, told Forbes .

"And with new companies comes the need to hire staff. Without a doubt, this will help the current unemployment rate," she said.

After the bill is signed, the Securities and Exchange Commission (SEC) will have 270 days to make additional regulations. The agency is currently writing rules to govern crowdfunding, and some are already voicing their concerns about fraud .

According to an article published by Reuters on May 29, "Five Steps the SEC Can Take to Make Crowdfunding Work," the SEC must be able to find the "right balance between guarding against fraud and allowing the marketplace to work its will."

The article provides five suggestions to ensuring the success of crowdfunding:

• Make crowdfunding easily searchable.
• Define social-media boundaries.
• Allow crowdfunding portals to be selective.
• Let the private sector work.
• Don’t smother startups.

Crowdfunding refers to a collective cooperation by people who pool their money together via the Internet.

It is appropriate to assume that where money changes hands, fraud is a risk. But, according to the article published by Reuters , the real risk for investors is business failure. The SEC has months before finalizing the rules for crowdfunding.

Sources:

• Forbes
• Reuters

To learn more, contact our securities and broker fraud lawyers today.