The “buy local” movement has sparked a corollary trend: the movement to create local stock exchanges. Instead of investing in a faceless conglomerate or a mutual fund’s grab-bag of shares, people could buy into businesses they know and trade with, strengthening their local economies while bolstering their financial nest eggs.
Local stock markets were common in the U.S. during the industrial era of the late 1800s. Banks, as they do today, had a shady reputation and people wanted a way to put their money into more tangible things – like businesses they knew.
Nowadays, establishing a truly local stock exchange is so complicated that no one has done it yet – although a growing number of groups and individuals are investigating ways to chip away at the myriad regulatory obstacles.
Because stock markets are rife with the possibility of fraud, the federal Securities and Exchange Commission allows them only by special permission. Getting that permission involves proving that an exchange has mechanisms to ensure the legitimacy of ventures offering stock, that investors have the means to sell their holdings readily, and that the technological and administrative infrastructure exists to manage it all efficiently, among a tangle of other regulations.
The 2012 federal JOBS Act opened a door to eBay-like portals for crowd-funding stocks. Meanwhile, more than a dozen states, including Georgia, Alabama and Kansas, have revised their own securities laws in ways that could make local stock sales possible. At this writing, Michigan is poised to pass legislation that would create an in-state stock market. If the SEC approves it, other states will follow and local exchanges won’t be far behind.
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