In October 2015, the U.S. Securities and Exchange Commission finally approved its long-anticipated equity crowdfunding rules. Equity crowdfunding is the practice of raising equity for a company or project through an internet portal. Examples would be the sale of shares in a company or equity interests in a real estate investment. Except for offerings to accredited investors, which are generally limited to the richest 3% of Americans, equity crowdfunding has been illegal in the U.S., and therefore not offered by crowdfunding sites such as Kickstarter.com and Indiegogo.com.
The new SEC rules require equity crowdfunding sites (known as portals) to register in advance with the SEC. The registration forms will become available on January 29, 2016, and registrations may be filed starting in May 2016.
The SEC’s final rules permit individuals to invest in equity crowdfunding deals in amounts up to $100,000 in any 12-month period. The rules also limit the amount of money an issuer can raise using the crowdfunding exemption, generally not to exceed $1 million in any 12-month period, impose disclosure requirements on issuers for certain information about their business and the securities offering, and create a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions. Details can be found at the SEC’s website; a good summary is contained in this press release.
For more information we suggest this equity crowdfunding website.