With nod to SEC, the Fed Will Keep its Finger on the Pulse of Crowdfunding

The SEC regulations implementing the crowdfunding provisions of the Jumpstart Our Business Startups (JOBS) Act will influence the environment for crowdfunding in general and for community development finance specifically, said Federal Reserve Board Governor Jeremy Stein. In remarks at the Crowdfunding for Community Development Finance Conference in Washington, D.C., he noted that the crowdfunding implementing regulations are welcome and timely, because in many communities the traditional resources for community development are shrinking and the field is actively seeking to identify new sources of funding. 

Crowdfunding is a way in which businesses, including business start-ups, can raise money through online portals (crowdfunding platforms) to finance or re-finance their activities and enterprises. The JOBS Act provides for an exemption from SEC registration for online crowdfunding offerings, subject to investor protection provisions and some restrictions.

More broadly, Gov. Stein emphasized that the Fed is interested in crowdfunding even though it does not have a direct regulatory role because it is  important for the central bank to keep its finger on the pulse of financial innovation and the changing dynamics of the financial services industry. While noting that financial innovation can offer both opportunities and pitfalls, the official added that by carefully and even-handedly studying each new product or service at an early stage in its lifecycle the Fed can better understand both the potential benefits, as well as any risks for adverse impacts on households and communities.