Kenneth C. Oh
Counsel
212-784-6911 koh@sh-law.comFirm Insights
SEC Proposes Long-Awaited Crowdfunding Rules
Author: Kenneth C. Oh
Date: November 4, 2013
Key Contacts
Back
After months of delays, the Securities and Exchange Commission (SEC) finally released proposed rules pursuant to the JOBS Act to permit companies to offer and sell securities through crowdfunding.
While crowdfunding has become a popular way to raise money online, securities regulations kept it out of reach for many investors and small businesses. Once final rules are adopted, start-ups and growing ventures will be permitted to solicit investments from “everyday” investors using the Internet.
The SEC’s proposed rules to implement the JOBS Act provisions set forth the regulatory framework under which equity crowdfunding will operate. Some of the most significant provisions include:
- Limits on capital raised: A company can raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period.
- Investor caps: The rules place limits on the amount a person can invest over the course of a 12-month period. Investors with annual income and net worth of less than $100,000 can invest up to $2,000 or five percent of their annual income or net worth, whichever is greater. If either their annual income or net worth is $100,000 or more, the threshold increases to 10 percent of their annual income or net worth, whichever is greater, but investors would not be able to purchase more than $100,000 of securities through crowdfunding over a 12-month-period.
- Disclosures by companies: Companies conducting a crowdfunding offering must file certain information with the SEC, as well as provide it to investors and the intermediary facilitating the transaction. These disclosures include information about officers and directors, the company’s business and financial condition, and the offering itself. If more than $500,00 is raised, expensive certified financials are required of the issuer.
- Crowdfunding platforms: Crowdfunding transactions must take place through an SEC-registered intermediary, which can be either a broker-dealer or a funding portal. A “funding portal” does not have to register with the SEC as a broker-dealer, but must limit its operations to crowdfunding and cannot provide investment advice.
The proposed rules demonstrate the SEC’s goal of balancing the competing interests of promoting business growth and ensuring investor protection. On the one hand, the investor limits ensure that individuals do not risk more than they can afford to lose. On the other, the financial intermediary can rely on the information provided by investors regarding their income and net worth.
Now that the SEC has finally got the ball rolling on crowdfunding, the public has 90 days to comment. However, it could be six months or more before the final rules are issued. In the meantime, businesses can continue to raise money from investors through the present private placement exemptions from registration.
If you have any questions about the SEC’s proposed crowdfunding rules or would like to discuss the legal issues involved, please contact me, Kenneth Oh, or the Scarinci Hollenbeck attorney with whom you work.
- Locations: Red Bank, NJ, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Author: Jesse M. Dimitro
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Author: Jesse M. Dimitro
Fred D. Zemel Appointed Chair of Strategic Planning at Scarinci & Hollenbeck, LLC
Business Transactional Attorney Zemel to Spearhead Strategic Initiatives for Continued Growth and Innovation Little Falls, NJ – February 21, 2025 – Scarinci & Hollenbeck, LLC is pleased to announce that Partner Fred D. Zemel has been named Chair of the firm’s Strategic Planning Committee. In this role, Mr. Zemel will lead the committee in identifying, […]
Author: Scarinci Hollenbeck, LLC
Novation Agreement Process: Step-by-Step Guide for Businesses
Big changes sometimes occur during the life cycle of a contract. Cancelling a contract outright can be bad for your reputation and your bottom line. Businesses need to know how to best address a change in circumstances, while also protecting their legal rights. One option is to transfer the “benefits and the burdens” of a […]
Author: Dan Brecher
What Is a Trade Secret? Key Elements and Legal Protections Explained
What is a trade secret and why you you protect them? Technology has made trade secret theft even easier and more prevalent. In fact, businesses lose billions of dollars every year due to trade secret theft committed by employees, competitors, and even foreign governments. But what is a trade secret? And how do you protect […]
Author: Ronald S. Bienstock
What Is Title Insurance? Safeguarding Against Title Defects
If you are considering the purchase of a property, you may wonder — what is title insurance, do I need it, and why do I need it? Even seasoned property owners may question if the added expense and extra paperwork is really necessary, especially considering that people and entities insured by title insurance make fewer […]
Author: Patrick T. Conlon
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
SEC Proposes Long-Awaited Crowdfunding Rules
Author: Kenneth C. Oh
After months of delays, the Securities and Exchange Commission (SEC) finally released proposed rules pursuant to the JOBS Act to permit companies to offer and sell securities through crowdfunding.
While crowdfunding has become a popular way to raise money online, securities regulations kept it out of reach for many investors and small businesses. Once final rules are adopted, start-ups and growing ventures will be permitted to solicit investments from “everyday” investors using the Internet.
The SEC’s proposed rules to implement the JOBS Act provisions set forth the regulatory framework under which equity crowdfunding will operate. Some of the most significant provisions include:
- Limits on capital raised: A company can raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period.
- Investor caps: The rules place limits on the amount a person can invest over the course of a 12-month period. Investors with annual income and net worth of less than $100,000 can invest up to $2,000 or five percent of their annual income or net worth, whichever is greater. If either their annual income or net worth is $100,000 or more, the threshold increases to 10 percent of their annual income or net worth, whichever is greater, but investors would not be able to purchase more than $100,000 of securities through crowdfunding over a 12-month-period.
- Disclosures by companies: Companies conducting a crowdfunding offering must file certain information with the SEC, as well as provide it to investors and the intermediary facilitating the transaction. These disclosures include information about officers and directors, the company’s business and financial condition, and the offering itself. If more than $500,00 is raised, expensive certified financials are required of the issuer.
- Crowdfunding platforms: Crowdfunding transactions must take place through an SEC-registered intermediary, which can be either a broker-dealer or a funding portal. A “funding portal” does not have to register with the SEC as a broker-dealer, but must limit its operations to crowdfunding and cannot provide investment advice.
The proposed rules demonstrate the SEC’s goal of balancing the competing interests of promoting business growth and ensuring investor protection. On the one hand, the investor limits ensure that individuals do not risk more than they can afford to lose. On the other, the financial intermediary can rely on the information provided by investors regarding their income and net worth.
Now that the SEC has finally got the ball rolling on crowdfunding, the public has 90 days to comment. However, it could be six months or more before the final rules are issued. In the meantime, businesses can continue to raise money from investors through the present private placement exemptions from registration.
If you have any questions about the SEC’s proposed crowdfunding rules or would like to discuss the legal issues involved, please contact me, Kenneth Oh, or the Scarinci Hollenbeck attorney with whom you work.