At this time, however, crowdfunding seems to be legally limited to seeking donations, as opposed to investors, and the SEC has yet to finalize the rules related to equity-based crowdfunding.
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The Plaza Group claims in bankruptcy filings that it was undone by recent accounting rules that force private equity partnerships to write down the value of their investments in accordance with market valuations, as opposed to holding them at cost.
Frankfurt's Neuer Markt exchange, which has had some success in bringing young companies to the market, and in attracting new equity investors, has done so by ditching traditional rules.
ECONOMIST: European financial regulation: No SECs please, we’re European | The
For instance, when Northrop Grumman and Lockheed Martin sold off units engaged in providing highly classified services for spy satellites due to new conflict-of-interest rules, the buyers were private-equity firms.
FORBES: Faltering Defense Industry Faces New Danger: Activist Investors
New accounting rules demand that they start valuing their equity portfolios at market value at the end of this month, which could constrain their ability to pay dividends out of retained earnings.
The new rules state that the amount of common equity - the best capital for absorbing losses - that banks have to hold will rise from 2% of their loans and investments to 7%.
Collectively, all these rules will create a looser environment for raising equity.
Valiant efforts to interpret these rules are being made by the International Private Equity Valuations Board, an industry body that some buy-out firms support.
For investors such as pension funds, buying a stake in a listed entity may appeal if their internal rules stop them investing directly in private-equity or hedge funds.
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Older couples who thought they were building a secure nest egg are discovering that a chunk of the equity they thought they had will be eaten up IRS depreciation recapture rules that impose a tax on the accumulated depreciation deductions they took for all those years.
Kickstarter has determinedly said it will not become an equity crowdfunder when (and if) the SEC ever nails down those rules.
Some private equity firms, like Blackstone, are public companies and are required under SEC rules to have a registered public accounting firm audit.
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Historically, the general partners of private equity funds just held their portfolio at cost, but last year they were forced by new accounting rules to mark their holdings to market.
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The cushion could be plumper still in some places: Europe is split over how strictly to enforce these rules, and whether to allow countries such as Britain and Sweden to add yet another wedge of equity on top.
With his lively writing and cynical humor, this author, a partner in a private equity firm, is a captivating tour guide to a Wall Street wonderland of greed, folly and deceit whose rules seem lifted from Ambrose Bierce's The Devil's Dictionary.
The JOBS Act accomplishes private offering rules reforms, implements many of the recommendations of the IPO Task Force and endeavors to create a healthy equity market food chain.
FORBES: With the JOBS Act, Congress Throws Open the Door for Private Stock Offerings
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