3c hapter - Index of

224 Conclusion
investors. “Normal everyday investors are saying we would like an
option, we do not want to have all of our money in the global market,
we want a local market. And that’s what is new, I think.” She
pauses. “Well, not exactly new. A hundred years ago that’s how it
was done.”
Eat Local, Buy Local, Invest Local
Locavesting is in its very early days. And the regulatory challenges
cannot be overstated. The SEC is acutely aware of many of the
issues holding back small business capitalization, but it must balance
that with its duty to protect investors. “It’s a tightrope we’re
trying to walk,” one SEC offi cial told me.
Several modest proposals could help, such as the crowdfunding
exemption for small investments of up to $100, and a proposal to
raise the threshold for when a company is considered public. (Right
now, when a company reaches 500 shareholders and $10 million in
assets, it automatically becomes a public reporting company even
if their shares are privately held—a trigger that undermines the
“pennies from many” crowdfunding and DPO models, and that has
forced companies such as Google and Facebook onto an IPO path
before they are ready).
The Kaufmann Foundation, which focuses on entrepreneurship,
has a compelling proposal. It advocates exempting companies
with a market capitalization of less than $100 million from
securities regulations as a way to reinvigorate a languishing small
cap marketplace. Others suggest simplifying the regulatory thicket
of overlapping state and federal securities laws.
“These questions—how do we encourage small business, how
do we encourage new ideas, how do we encourage entrepreneurs
to do what they do best—are critically important for the future
growth of the economy and for the innovation of new products
and services that we want to bring to the marketplace of ideas,”
said Steve Wallman, founder of FOLIOfn and a former SEC commissioner.
“It’s a great challenge for people who care about public
policy to fi gure out how to do that right.”