SEC Issues Proposal on Crowdfunding

On October 23, 2013 the Securities and Exchange Commission (“SEC”) unanimously voted a proposal to allow companies to raise funds by issuing equity through crowdfunding. If passed, the proposal should be good news for all those small to medium companies hoping to increase their fund-raising capabilities by issuing securities and selling them to crowdfunding investors.

Some of the limitations set by SEC under the proposed regulation are:

  • A company would be able to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period.
  • Investors, over the course of a 12-month period, would be permitted to invest up to:
    1. $2,000 or 5 percent of their annual income or net worth, whichever is greater, if both their annual income and net worth are less than $100,000, or
    2. 10 percent of their annual income or net worth, whichever is greater, if either their annual income or net worth is equal to or more than $100,000. During the 12-month period, these investors would not be able to purchase more than $100,000 of securities through crowdfunding.

The proposal can be found here.