A new study was released by the SEC investigating incidents of fraud under Regulation CF fundraises. Under Regulation CF, enabled by the JOBS Act, entrepreneurs can raise up to $1 million dollars for essentially start up ventures without having to undergo the same kind of extensive disclosures that a company would make if it were doing an IPO.

The findings were, to say the least, highly interesting.  According to report:

 “During the considered period, there were few instances of legal proceedings (involving FINRA or the Commission) referencing Regulation Crowdfunding, so we cannot infer a systematic relation between any particular characteristics of the offerings and the incidence of such legal actions. In particular, a search of publicly available information in the Commission’s litigation releases has not identified civil complaints or administrative proceedings filed against Regulation Crowdfunding issuers or intermediaries.”

Still, I wonder how much caution is required when reading the numbers (or the absence of them). True, Regulation CF transactions appear to comprise a clean, healthy market from the standpoint of investor protection dn fraud.  But pursuing private actions are expensive–and it’s unclear how many individuals would pursue an action even if they were aggrieved.  And the SEC, temperamentally, is used to going after the big fish, not the little guy.  So I wouldn’t necessarily expect to see many administrative actions in the space.

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