SEC approves equity crowdfunding rules
After a delay of more than three years, the Securities and Exchange Commission on Friday issued a set of final rules for equity crowdfunding, which will allow small investors to receive shares of a private company in exchange for investments they make, The New York Times reported.
Until the change, provided by the Jump-Start Our Business Start-Ups Act passed in 2012, equity crowdfunding had been legal only for accredited investors, or those who met required levels of assets and income.
The revised rules allow companies to raise up to $1 million in a 12-month period through a crowdfunding campaign.
Investors with less than $100,000 in annual earnings would be allowed to invest the lesser of up to 5 percent of their income or $2,000 within a 12-month period. Investors with an income or net worth of more than $100,000 will be permitted to invest 10 percent of the lesser of their annual income or net worth.
“This rulemaking has generated tremendous interest from potential issuers, investors, and intermediaries,” SEC Chair Mary Jo White said in prepared remarks prior to the commissioners’ vote. “The more than 480 comment letters we received raised a number of important issues, focused on the best ways to protect investors while ensuring that securities-based crowdfunding is a workable path for raising capital by smaller companies.”
The SEC’s four commissioners voted 3-1 to adopt the new rules, which are expected to take effect early next year.
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