Well, that was fast. On the same day that President Obama signed the Jumpstart our Business Startups Act (JOBS Act) into law, a collection of 13 self-described “equity and debt crowdfunding platforms and industry experts” have banded together to form a trade group, looking to bring stability and trust to the newly reborn crowdfunding space.
The 13 entites have formed what they are calling the ‘Crowdfund Intermediary Regulatory Association (CIRA),’ stating their goal to be to “pursue the development of self-regulation for the crowdfunding industry.” Given that full interpretation of the law is anyone’s guess at the moment, it being so fresh, the group could have a material impact.
Here’s the gist of what is going on: In the JOBS Act are new rules that allow for small, even micro investments into new and emerging companies by individuals. Unlike with sites such as Kickstarter, these investments count, and their executors end up holding stock. Obviously, this has raised the hackles of many who fret about fraud.
However, the law has been signed, so the process of litigating whether it should be passed, is moot. From now on, the discussion will focus on what to do now that it is in place. The CIRA plans to build an Investor’s Bill of Rights, which they intend to use, along with a test, as a method of keeping people from being foolish with their money.
One member of the CIRA is the CAPS Crowdfunding Accreditation Program, which approves certain crowdfunding sites into its fold, declaring them to be safe for use. A bit as some sites have stickers from security providers, declaring them to be clean, so does the CAPS program wish to become the safety metric for crowdfunding.
Of course, self-declaring as the leader of an industry always feels hasty, but on the whole, what the CIRA is enacting looks to be on the right path. Which is good, as crowdfunding is going to need a few elder statespeople to keep its sailing smooth.