Instead of doubling down on opacity, Congress should take a leaf from the non-profit industry. There, at least everybody's tax return (Form 990) is available for public inspection. Some of them are very illuminating. Even just that would be a better start than this.
The idea that continuous disclosure has to be burdensome is a relic from the past. You want to raise money from my mom? Let me monitor your Quickbooks online account.
On the other hand, there's a problem with publishing too much information: competitors. If for a modest investment I could buy access to the details of our compeitors' QuickBooks accounts and product plans, I'd do it in a heartbeat.
Still, I agree with your basic point; publishing information is so much cheaper and easier than in the past that we can shift radically in the direction of increased transparency without imposing significantly greater costs on businesses. If that increases the pool of capital available for innovation, society will be net better off.
True, the competitors argument is the first thing people would cite against continuous meaningful disclosure. The counterargments are
1) Not as important if everyone is disclosing on a level playing field.
2) More information supports better functioning markets==better decisions by the private sector. This is a huge benfit IMO.
3) Often a red herring for hiding weak management, not competitive information.
4) Truly sensitive information can be scrubbed or aggregated. There, a real job for a regulator besides napping.
Bonus point. The startups built around disclosure and analytics could be more interesting than the capital raising jam job companies that are going to be spawned.
II. Requirements on Intermediaries
The JOBS Act requires crowdfunding intermediaries to register with the SEC, either as a broker (which is an expensive and onerous process), or as a new thing called a “funding portal”. Funding portals will also be required to register with FINRA, the financial industry self-regulatory organization.
A) providing certain disclosures and investor education materials to investors
(B) ensuring that the investor has reviewed educational materials and answers questions indicating that he/she understands the risks involved
(C) performing certain background checks on the issuer
(D) provide a 21 day review period before any crowdfund securities are sold
(E) ensure that an issuer does not receive investment funds until its target investment minimum has been reached, and that investors may cancel their commitments to invest as provided by the SEC (no word yet on how these cancellation provisions are going to look)
(F) ensure that no investor surpasses the investment limits set forth above in a given 12 month period in the aggregate – i.e. the limits described above with respect to investors apply to all crowdfunding investments in a given 12 month period, not just to individual investments, and the burden is on the intermediary to monitor this
(G) take steps to protect the privacy of investors
(H) not pay finders fees to promoters or lead generators with respect to investors (it appears to be okay to pay finders fees for issuer leads)
(I) not allow the intermediary’s directors, officers or partners to have a financial interest in an issuer using its services
There are /plenty/ of disclosure requirements and more coming down the pike when the Commission is through drafting what else is required.
It is not like there is going to be a Kickstarter where people just start throwing money at random ideas with no way to check who and what they are investing in.
(B) Names of directors, officers, and 20% stock holders
(C) Description of the business of the issuer and business plan of the issuer
(D) Prior year tax returns & financials
(E) Use of proceeds
(F) Target offering amount, deadline, and progress updates
(G) Share price and methodology for determining price
(H) Cap structure
A, B, E, F, and G are trivially generated (note that the sharks will have fronts to avoid having to put up the same names constantly). F and G are trivial to the point of boilerplating.
C and D may look like serious requirements, but if we're talking about early stage company investments here, how stringent do you think these requirements could be? What do you think the tax returns for a 1-year-old pre-VC tech company look like?
Even the full SEC disclosure policy for IPOs was insufficient to keep clowns out of the public market in '99.