Nydia M. Velazquez: “In order for entrepreneurs to continue to fulfill their traditional role as job creators, it is essential that they have…”

“In order for entrepreneurs to continue to fulfill their traditional role as job creators, it is essential that they have access to the capital they rely upon as fuel for innovation and economic expansion. Crowdfunding represents a promising new tool for this service. But in order to realize its full potential, investors who buy these securities must be able to make fully informed decisions. My amendment will make this possible by requiring crowdfunding intermediaries to disclose how they are compensated. Despite its relatively recent emergence, crowdfunding shares many characteristics with ordinary stock investing. In this marketplace, however, Web sites and social media will fill the role of brokers and dealers. They will act as a conduit between stock insurers and ordinary investors. Unlike stockbrokers, these intermediaries may be paid by commission, flat fees, or subscriptions. Depending on their compensation structure, however, intermediaries may have an incentive to advertise the ideas that provide them with the most money, rather than what makes the most investment sense. This not only puts ordinary investors at risk but also undermines the entire premise of crowdfunding, which is supposed to promote those ideas that have the most merit. Compensation disclosure is not without precedent. It is currently required by all securities brokers and dealers.…”