US Signals Liberalization of Fundraising Rules

ICOBox head of International PR Dima Zaitsev on the US regulator’s plans which might make it easier for Americans to support ICOs

The United States Securities and Exchange Commission (SEC) has signalled it wants to enable ordinary investors to invest in non-stock exchange listed companies. SEC Chair Jay Clayton told the Wall Street Journal that the Commission is considering liberalizing rules for non-accredited investors, who can be defined as individuals with a net-worth of less than $1 million or less than annual income of $200,000.

Clayton’s comments reflect the falling number of publicly traded companies and the fact that many of the most exciting tech companies remain privately funded for many years before any possible Initial Public Offering (IPO). The Chair commented that it’s important to ask “who is participating” in funding the highest growth companies. In many cases, critics allege, it is a small circle of Wall Street institutions and Silicon Valley funds who get their pick of the most exciting startups. A survey by McKinsey said that 91% of investors believe private markets generate better returns than public assets.

President Donald Trump seemingly initiated the SEC’s plans, tweeting “In speaking with some of the world’s top business leaders I asked what it is that would make business (jobs) even better in the U.S. “Stop quarterly reporting & go to a six month system,” said one. That would allow greater flexibility & save money. I have asked the SEC to study!.”

The SEC’s comments are welcome as investing in the hottest startups shouldn’t be reserved for just a “chosen few.” The SEC has an important role to play in preventing fraud and market manipulation but shouldn’t bar people from making their own investment decisions just because they, for example, “only” make $199,000 per year. Cryptocurrencies and decentralized networks are democratizing finance and technology but the US has until now seemed intent to lag behind the rest of the world.

Initial Coin Offerings (ICOs) collected over $11bn in the first half of 2018, with US citizens and residents largely excluded from supporting such projects due to the SEC rules.