Friday 30th October is going to make into US early stage finance history. The SEC has approved Title III of the 2012 JOBS Act, with 3 votes out of 4, including the Chair’s, Mary Jo White, thus opening online investing to retail investors, that is 91% of savers in the US.
With this vote, a big milestone was achieved and interested stakeholder, that have been waiting it for roughly 3 years can now cheer. Title III is also the last part of the JOBS Act, signed by President Obama back in 2012, to be voted on. Prior to this, the SEC voted Title I in 2012, which eased requirements on emerging growth companies, defined as companies with less than $1 billion in revenues. Then, in 2013, the US Financial Authority approved Title II, which allowed public advertising of private offerings to accredited investors. Earlier this year, instead, the SEC passed Title IV which enables companies to raise more money under a limited public offering, raising the cap on small fundings from $5 million to $50 million in a 12-month period, from both accredited and unaccredited investors if the company complies with certain filings and audits.
However, Title III has been probably the most challenging part for SEC, as it can expose the general public to risky investments. Therefore the financial authority has taken time to come up with rules that could allow companies to offer investments to US citizens, while protecting the latter from taking on too much risk. In particular, the recently approved rules include new requirements for companies, investors and funding portals.
The rules will enter into effect within 6 months. However, the Crowdfunding Regulations have been welcomed by many stakeholders but others have expressed some criticism. In particular, some believe that the rules are too restrictive, both for investors, which no matter how wealthy and sophisticated they are, they are allowed to invest maximum $100,000 per year; and for companies, for which complying with so many requirements can be too costly, especially compared with the maximum amount they can raise in this way (i.e. $1 million).
Read more about requirements for investors, companies, and funding portals on Crowd Valley Blog.
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This entry was posted on Thursday, November 5th, 2015 at 2:00 pm and is filed under Business Updates. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.