The US treasury came out with a report on Friday with a few ideas on how to encourage growth in US capital markets. They want to loosen the reins a bit on regulations for businesses.
They want to repeal disclosure requirements for natural resource extraction companies. Another disclosure they want to repeal is reporting the salaries of employees, in contrast to the CEO's.
They want to increase the amount of crowdfunding that is legal by 4 million dollars. As well as "Opening up private markets to more investors and revisiting the "accredited investor" definition...Limiting
use of informal guidance, no-action letters or interpretation to impose
new regulations, in contrast to making rules through notices and
comments."
Overall I think it's a good idea to revisit the idea of who an "accredited investor is". Right now it is based on income, you are qualified if you have a net worth of $1 million or an annual salary of $200,000 for the last two years. Opening this up with get rid of some of the barriers of entry for firms. And will make firms more competitive, leaving consumers with a better product. As well as happy people being allowed to have their own firms if they wish to pursue such.
A question that we have to keep in mind, is if these deregulation's will in the end have a net benefit for consumers.
Taking away disclosure of salaries could mask corruption in firms. 4 million more dollars worth of funds could be funneled from a source with bad intentions. And firms could fail without the security of a secure high net investor.
Do you guys think this will be beneficial in the end for consumers as well as firms?
I think that this could possibly be harmful for consumers, as well as firms, in the end. One reason is because loosening the reins could cause discrepancies in rules. One firm could take the "relaxed" rule one way, and another firm could take it a different way. This could cause corruption between firms and standards of reporting, as well as cause loopholes to be more present. Another reason is, like you had mentioned, crowdfunding could be funneled from a source with bad intentions. In addition, this increase could cause businesses to steer away from tradition small business loans or business line of credit, which could be just as effective and much easier to obtain. Waiting for a company's idea to catch fire could be more costly to the firm/consumer.
ReplyDeleteI think that this may help large businesses grow more and have more financial capital to invest in research for better technology as the big companies are always looking to improve production. The consumer in turn could benefit from better production which leads to a better product. However, it is possible for companies to mishandle the money and funnel somewhere as was seen in 2001 when Enron reported losses which were not true.
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