You, your mom, or that random guy down your block will all soon be able to join the ranks of startup investors.
The Securities and Exchange Commission voted this past week to approve so-called equity crowdfunding rules for investors, an effort spawned by the passage of the JOBS Act way back in 2012. What that means is that startups or small businesses looking for investors can go through brokers or online platforms to find them—and those investors can now be, well, anyone.
This is a pretty big deal. It marks a shift in the kinds of capital that startups and small businesses can raise. Startups today often turn to venture capitalists, angel investors, bankers, and other accredited investors, but access can require the right connections, which are often hard to come by outside major financial hubs like New York, San Francisco, and Boston.
‘Even if you’re truly invested in investing in a startup, the odds are against you.’
Now, entrepreneurs can turn to the crowd. And if you’ve part of the crowd that’s always wanted to invest in a startup, you may soon be able to in ways that you couldn’t before. But there are some things you need to know. Since the passage of the JOBS Act, experts have worried about putting safeguards in place to protect unsophisticated investors, as well as protections for startups to minimize fraud. The SEC is hoping that its new rules will address those concerns. Here’s what you need to know.
So, You Want to Invest
In the past, only so-called accredited investors have been able to invest in startups. Here’s what that meant in a nutshell: If you made less than $200,000 a year, and you didn’t have a million bucks in assets, you couldn’t invest. Now, starting sometime next year, even if you aren’t that well off, you’ll be able to buy into companies you like.
Former Fidelity chief Edward ‘Ned’ Johnson III had the idea for Luminex. Photo: Brian Snyder/Reuters
BOSTON—The most exclusive new club on Wall Street opens for business next week and there are a few things you won’t find: members with under a billion dollars or high-frequency traders.
Those are among the rules laid out by the founding members of Luminex, a private trading platform designed to give the world’s largest asset managers a new place to buy and sell large blocks of stock.
Large asset managers have complained in recent years that exchanges are now rife with high-speed traders who rapidly change the prices of their bids and offers to take advantage of heightened interest in a stock, cutting into profits of the firms that place them. “Dark pools,” a type of private trading venue originally designed to help institutions anonymously trade, have had their own problems with keeping client orders secret.
In response, last year a group of firms led by Fidelity Investments began work on a trading platform that would provide what it calls a cheap and secure solution. In addition to Fidelity, other Luminex owners include BlackRock Inc., the largest money manager in the world by assets, Invesco Ltd. and Capital Group Cos.
Luminex is looking to potentially win market share from other dark pool operators that focus on block trading, such as Bids Trading LP, Liquidnet Holdings Inc. and Investment Technology Group Inc. Those venues account for more than 200 million shares traded every week, according to the latest data from the Financial Industry Regulatory Authority.
In interviews at the Boston offices of Luminex Trading & Analytics LLC, executives detailed for the first time how the platform will operate. Luminex is technically a dark pool, too. But it stands apart from the other roughly 40 dark pools because of strict membership requirements, a low-cost structure, and rules that encourage trading large amounts of stock in each transaction, analysts said.
Here is how it works:
Luminex only allows institutions with a billion dollars or more under management and a “long-term investment strategy,” so that means no high-frequency traders or quantitative hedge funds.
Credit Suisse revealed details of a planned overhaul under its new chief executive, including raising roughly $6.3 billion in new capital, as the Swiss bank delivered a set of disappointing third-quarter results.
In many ways, economic recessions are a lot like the flu.
Like that particular viral infection, some cases of financial turmoil can be significantly worse than others, and certain behaviors tend to increase their likelihood. But when they’ll strike is notoriously unpredictable, and no matter how many precautions the U.S. takes – no matter how much metaphorical hand sanitizer the economy burns through – there’s no surefire guarantee that it will make it into next week, next month or next year completely healthy.
The Great Recession was the worst downturn the economy’s suffered in decades. And although the U.S. has slowly but surely recuperated, another recession will strike again.
In fact, the economy could already be in trouble.
“Most recessions happen for a different reason each time,” says Tara Sinclair, chief economist for employment site Indeed. “So if we’re just too obsessed with the reasons that caused the first one, we may miss what causes the second one.”
JACKSON HOLE, Wyo.—Federal Reserve officials emerged from a week of head-spinning financial turbulence largely sticking to their plan to raise U.S. interest rates before the end of the year.
During the Federal Reserve Bank of Kansas City’s annual economic symposium here, many policy makers signaled that stock-market volatility and China’s woes haven’t seriously dented their view that the U.S. job market is improving, and that domestic economic output is expanding at a steady, modest pace.
Inflation might remain low for longer thanks to falling oil prices and a strong dollar. Officials will continue to keep a close watch on markets and China. But they hope U.S. consumer-price inflation will start inching toward their 2% annual target as the economy’s untapped capacity gets used up, leaving them in position to start raising rates after several months of forewarning.
“There is good reason to believe that inflation will move higher as the forces holding inflation down—oil prices and import prices, particularly—dissipate further,” said Fed Vice Chairman Stanley Fischer in comments delivered to the conference, which ended Saturday.
The Fed has said it will raise rates when it is reasonably confident the inflation rate will rise again to 2%. Mr. Fischer’s comments suggested he believed the economy is closer to that point, although he pointedly avoided sending a signal about whether the Fed will act at its next meeting.
“I will not, and indeed cannot, tell you what decision the Fed will reach by Sept. 17,” Mr. Fischer said.