What will keep the Internet from reaching its potential as a capital-formation tool?
Womack: High-profile fraud could be a problem. That could cause a regulatory backlash. I sit on the Securities and Exchange Commission’s (SEC’s) Government/Business Forum on Small Business Capital Formation, and I can say the SEC is very much in tune with the needs of small business. Still, it has to balance that forward-thinking posture with being on the hot seat when an investor gets defrauded out of $100,000. As promising as the Internet is for raising capital, it also has the power to help defraud investors. The real regulatory threat comes from the states. If you want to sell an offering in more than one state, you can get comments back from [different] state regulators that are diametrically opposed to one another. When that happens, it’s very difficult to figure out what to do. The new coordinated review procedures for state and federal registration statements, which clear some types of offerings for an entire region of the country, is an important step forward, but there’s more
