Crowdfunding Is Here... Sort of

September 05, 2012

The Securities and Exchange Commission (SEC) announced its first proposed rule that will help make equity-based crowdfunding a reality. The proposed rule (Rule 506) will allow for the general solicitation and general advertising of securities. At this point, however, the rule will only apply to accredited investors — an individual with income of more than $200,000 per year or a net worth of over $1 million dollars, excluding the value of the investor's primary residence. To ensure this, the businesses issuing the securities must take reasonable steps to verify that the purchasers of the securities are accredited. The SEC did not comment on when advertisement of securities offerings to non-accredited investors will be permissible.

The SEC is accepting comments on the proposed rules until September 29. After the reviewing all comments, the SEC will determine whether to adopt the proposed rule. Its passage would mark a relaxation of the Sunshine Act, an SEC regulation that prohibits companies from advertising in newspapers, online or other mediums. Read the press release...

federal agency, crowdfunding