The so-called JOBS Act, a pro-Wall Street law rushed through Congress by both parties and signed by President Obama as election-year campaign financing accelerated last month, will spawn a new wave of investment scams through online "crowdfunding" appeals to raise money for no-name companies, the Pennsylvania Securities Commission predicts in this statement.
"The way the new law was written, it's pretty much 'buyer beware,'" says Steve Irwin, a Pittsburgh lawyer and former aide to lucky-handed stock-picking Sen. Arlen Specter, R-Pa/D-Pa, and one of the three state Securities Commissioners charged with keeping small-company Pennsylvania share sales honest.
"The lax oversight implicit in the new law is likely to attract people trying to game the system and scam people out of their hard-earned money," Irwin said in the statement.
"One of the problems with the Internet is that it's often hard to tell the good guys from the bad guys," added commissioner Vincent Gastgeb, a Pittsburgh-area county councilman and fast-food salesman.
Congress gave the SEC until year's end to write rules that would exempt online crowdfunding from regulation. "Before the SEC rules are adopted, investors should beware of promoters who jump the gun by offering investments through crowdfunding now," added PSC chairman Bob Lam, a Montgomery County real estate agent and ex-Cheltehnam Township commissioner, has been on and off the commission since 1965.
And then things'll get worse: "When the new regulations are adopted, crowdfunding investments will not be reviewed by regulators before they are offered to the public, nor will they be required to provide the same level of disclosures to investors or regulators required of securities offerings. Investors will need to prepare themselves to be bombarded with all manner of offerings and sales pitches."