Mary Schapiro, the outgoing chairwoman of the Security and Exchange Commission, leaves behind an impressive legacy: In each of the past two years, the SEC chairwoman has brought more enforcement actions than in any prior year, all during "one of the busiest rulemaking periods in decades," according to an official SEC statement.
But on setting the regulatory guidelines for the JOBS Act--which will determine the legalities of crowdfunding--Schapiro has notoriously dragged her feet, saying, back in June, that it was "not feasible" to meet the JOBS Act's 90-day deadline.
That delay left many entrepreneurs frustrated.
"The law was passed in April, and it had 90 days to be implemented," Rory Eakin, co-founder and COO of CircleUp, a San Francisco-based crowdfunding start-up that launched in 2011, told Inc. in September, when he testified before the Committee on Oversight and Government Reform. "It was due to be implemented in early July, and we're still waiting."
Specifically, in order for crowdfunding sites such as CircleUp to officially start dealing in equity, the SEC needs to update rules for "general solicitation," which define exactly how entrepreneurs go about raising money from investors on the Internet.
It's a complicated subject, certainly, but it's now late November, and investors and entrepreneurs are still twiddling their thumbs.
And according to some, Schapiro's departure will inevitably delay the process even further.
Eric Mack, managing editor of Crowdsourcing.org, which covers the crowdfunding ecosystem, believes that it will take incoming interim SEC chief Elisse Walter several months to acclimate to her new role--which would leave would-be founders waiting even longer.
"So consider this news today a sort of official confirmation of what we've already known for months--equity crowdfunding will not be ready to go by the end of the 9-month rulemaking deadline included in the JOBS Act," he wrote. "How much longer will we have to wait? Several months, or perhaps a full year, or perhaps longer."
But not all crowdfunding advocates are pessimistic. Karen Kerrigan, the president of the Small Business & Entrepreneurship Council, a Washington, D.C.-based non-profit dedicated to promoting small business and entrepreneurship, believes Walter may be able to inject a burst of energy into the crowdfunding effort.
"Perhaps new leadership--even if it is an interim leader--will breath some enhanced productivity and energy into the SEC's work," Kerrigan told The Business Journals' Washington Bureau. "At the staff level, the SEC is very engaged on JOBS Act provisions, and with the right signal and leadership I think the process can accelerate."
This discussion --whether Walter's appointment will delay or expedite the implementation of crowdfunding regulations--is already a topic on Quora. Charles Luzar, the director of CrowdfundInsider.com, agrees with Kerrigan that Walter's appointment will be a positive sign for start-ups.
"I've seen a few sources this morning saying that Schapiro stepping down will somehow delay implementation of the JOBS Act past the generally accepted notion of mid to late 2013," he writes. "I don't see any indication that this is the case. Ms. Walter's past experience should help limit delays."
Specifically, Luzar points to a Nov. 15 speech by Walter on the subject of crowdfundning. In it, Walter acknowledges the challenges of lifting the general solicitation ban ("I think everyone can agree that removing the ban on general solicitation, essentially allowing public 'offers' in private securities transactions, is a fundamental change in the securities markets"), but otherwise seemed genuinely motivated to establish the framework to allow entrepreneurs to begin raising capital through the crowd.
"A vital prerequisite to efficient capital formation is a market in which investors have confidence," Walter said. "If allowing general solicitation results in increased incidence of fraud or sales of securities to investors that do not have the sophistication to understand the risks and merits of a particular investment, we will have failed not only investors, but small businesses as well."
She continued: "On the other hand, we should not block this change because we are afraid that harm will result; it is the responsibility of regulators (and market participants as well) to determine how to obtain the benefit of the change while safeguarding against the downside risks to investor protection and the public interest."