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Abstract

The recent enactment of Regulation A+ makes it possible for the first time for companies to conduct retail equity crowdfunding (i.e., equity crowdfunding campaigns involving general solicitation of unaccredited investors). On its surface, Regulation A+ seems poised to provide dual benefits to start-ups by both democratizing access to capital and easing the transition into public company status. However, Regulation A+ is largely a solution in search of a problem. There is little empirical evidence of an equity gap for early stage companies, nor is there evidence that the recent dip in small-company IPOs has anything to do with regulatory burdens. While Regulation A+’s two main raisons d’etre are likely misguided, the regulation may still provide modest, but important, social benefits. Close enforcement is needed, however, to ensure these benefits do not come at the cost of market integrity and potential losses to ordinary investors.

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