U.S. SEC to release long-awaited 'crowdfunding' rule
Source : (Reuters)
Entrepreneurs and start-up companies looking for backing will be able to solicit small investments over the Internet from the general public under a new proposal to be released by U.S. regulators on Wednesday.
The Securities and Exchange Commission’s “crowdfunding” plan is a requirement in the Jumpstart Our Business Startups (JOBS) Act, a 2012 law enacted with wide bipartisan support that relaxes federal regulations to help spur small business growth.
Equity crowdfunding lets small companies raise money by pooling together tiny investments from people around the country in exchange for a potential financial return.
If adopted by the five-member SEC, the rule would be a major shift in how small U.S. companies can raise money in the private securities market.
Private companies are now only allowed to solicit investors deemed to be “accredited,” meaning they have a net worth of $1 million, excluding the value of their home, or an individual annual income over $200,000. The crowdfunding rule would let small businesses raise over $1 million a year by tapping unaccredited investors.