The state securities regulators, NASAA, just recently published their list of financial products that pose investor protection concerns. Not surprisingly given the level of rhetoric from the states, crowdfunding and internet-based offers of securities are at the top of the list of "new threats" to investors. The state securities regulators caution that once JOBS Act provisions governing crowdfunding are finalized, the use of the internet to raise capital will become more prevalent, as will fraud. Private offerings made in reliance on Rule 506 of Regulation D are cited as a "persistent" threat. The statement notes that these offerings are "high-risk and may not be suitable for many individual investors." Interestingly, in all of the commentary on risks posed by Regulation D offerings, little effort seems to be made to draw distinctions among the types of companies using Regulation D offerings for capital raising. Many already public companies rely on Regulation D offerings to raise capital. Presumably, there is less concern regarding fraudulent practices in connection with these offerings.
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