New Crowd-Funding Rules Could Affect You


 

The U.S. Securities and Exchange Commission recently proposed a set of rules that would somewhat relax the bans on companies advertising for investors as part of the mandated rules for crowd-funding.

The agency has until Dec. 31 to come up with rules for small-time investors, the target of the crowd-funding concept.

Until now, crowd-funding in this country has been mainly limited to small businesses that raise capital through small contributions from investors who, in return, get items from the businesses ranging from coffee mugs and t-shirts to mentions in books.

The Jumpstart Our Business Startups Act (JOBS Act) signed in to law by President Obama last spring mandated an easing of the rules governing how businesses seek funding to try to spur business growth and job creation.

The SEC has been charged with developing those rules. Let’s take a look at what’s been done so far.

The Proposed Changes

The SEC has proposed allowing companies to solicit and advertise their securities for sale to accredited investors.

The agency currently requires companies that want to sell securities to register their offerings through the SEC or use a registration exemption, which prohibits them from advertising the securities.

Part of the JOBS Act mandated the SEC remove the ban on advertising to accredited investors. The act also required businesses to make reasonable attempts to ensure investors who buy the securities were accredited. The SEC is taking comments on the proposed rules through the end of the month.

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