Crowdfunding had $1.5 billion in transactions in 2011. Because of the attention being given to the crowdfunding bill, we are looking at a $3.2 billion market in 2012. Almost all of that projected market is currently happening outside crowdfunding for equity transactions. In this nascent industry, half of that projection is also from the production of US companies. Now our holding firm, The Soho Loft, is proposing that we should export our expertise abroad. The US Commerce department agrees.
At our first meeting with the SEC, we quickly learned there would only be one self-regulatory organization involved, FINRA. Shortly thereafter, we revamped CFIRA so part of it became a trade association (CFPA) while the acronym CFIRA was modified to mean the Crowd Fund Intermediary Regulatory Advocates. This positioned our organization to actively lobby for a regulatory environment that would facilitate effective crowdfunding for equity.
One of the topics we haven’t asked the SEC about during my last three visits is how do we get foreigners without social security numbers to place investments in the US? This is extremely difficult when tracking investors is legally required. It seems logical to use a SSN for this, but there might be a more effective option. Our next conversation with the SEC will include this question, and I will highlight the recommendation that foreign investors should not be excluded. We will ask the SEC to consider allowing foreign investors to invest with an Individual Taxpayer Identification Number (ITIN). The IRS passed an ITIN regulation on Dec. 17, 2003. It reads, in part:
“Foreign buyers and sellers of U.S. real property interests need Taxpayer Identification Numbers (TINs) to request reduced tax withholding when disposing of the property interest, and to pay any required withholding. Individuals who do not qualify for Social Security Numbers (SSN) may obtain Individual Taxpayer Identification Numbers (ITINs) to meet the requirement to supply a TIN.
The Internal Revenue Service implemented new procedures, effective December 17, 2003, to strengthen controls on ITINs and ensure the numbers are issued for tax administration purposes only.”
ITINs would help import capital to the US and brand US innovation and early-stage investment without having to do expensive road shows and face-to-face meetings.
This article was written by David Drake of the Soho Loft.
Image credit: CC by Tom