SEC Issues Proposal on Crowdfunding

On October 23, 2013 the Securities and Exchange Commission (“SEC”) unanimously voted a proposal¹ 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.

¹ main purpose of the present document is to provide educational information, and in no way its content shall be considered as legal advice. Thinkinlaw, LLC makes no representation or warranty as to the accuracy or reliability of any advice, opinion, statement or other information displayed on this document. Therefore, reliance upon any such opinion, advice, statement, or other information shall be at your own risk. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. You should not act upon this information without seeking advice from a lawyer licensed in your own state or country. Copyright © 2013 Thinkinlaw, LLC. Permission is granted to make and distribute, without any charge, copies of this entire document, provided that such copies are complete and unaltered and identify Thinkinlaw, LLC as its author. All other rights are reserved. In some jurisdictions this newsletter may be considered attorney advertising.