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-- senate is considering making it easier for small businesses and startups to raise capital through something called -- crowd funding.
We have a guest who says parts of the plan could be a major problem for investors Michael stalkers.
A partner at -- attend a -- row and he joins us now so Michael it sounds like a great idea of these startups need cash we have -- our capital crunch here in the United States why don't you favor the idea.
Well it does sound like a good idea in fact this bill is called the jobs act.
Unfortunately the only people who are gonna get any actual work out of the job back for probably securities lawyers.
There's really two reasons why the act has trouble.
Idea underlying the act is that.
If we increase IPOs we will help the economy grow and we will maybe do something to put a dent in the persistent unemployment that we've had.
And that the way that we should do that is.
That entrepreneurs have to disclose to investors before they can raise money from the public.
Now while that might sound like a good deal for entrepreneurs.
It's a very bad deal for investors especially retail.
This is nobody's nobody's forcing anybody to invest I mean you know you you there's always a risk and everything you do if you know that you're not gonna get as much information from a start up.
As you are from a regular IPO.
Buyer beware right.
That's certainly truly in the abstract of the potential consequences could be disastrous.
One thing that you have to keep your eye on is the fact that.
Entrepreneurs and small businesses already have ready access to capital from venture capital from Angel investors and from.
Well hold -- -- eyelash thickening not my -- ready access I can tell you a lot of investors say that -- so at all I don't know what it's like over -- to but there's a lot of a lot of credit crunch is going on here.
And a lot of small startups are saying we can't get credit from a bank let alone from a venture capitalists.
And the reason why they can't get that credit is because the venture capitalists see that there's too much risk.
And here's Rio where that the problem really is with crowd funding the kinds of companies that are going to be doing crowd funding which is essentially trolling for investors over the Internet.
Our companies that have not been able to get money from venture capital have not been able to get money.
From Angel investors because they're too risky.
And so it's gonna be these especially risky start up segment be permitted to.
Go reach out to retail investors without making basic disclosures about what their businesses up.
Out what's out there -- there are going to be -- disclosures and and and Michael there are some people like very prestigious people over a professor from Harvard Business School says.
History suggests that fraud and newly public companies is not a problem which makes sense.
Given the intense vetting process by lawyers accountants the SEC and everybody else we desperately need more capital allocated particularly -- this part of the economy.
Other people say that you know this is this could be -- a tremendous boon.
For small businesses the United States give -- a final word got about twenty seconds.
I think I'd rather listen to people like determine of the SEC Mary Schapiro and analysts who follow IPOs to to know that.
Putting more risk on retail investors is not the best way to stimulate the economy.
Michael soccer we appreciate your views thanks for coming.
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