by: Grow VC Group
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On February 16, 2016, the SEC’s Office of Investor Education and Advocacy issued an Investor Bulletin to educate investors about the opportunities that will arise for investors through securities-based crowdfunding (also known as equity crowdfunding, and digital investing), when the new rules will be enacted on May 16, 2016. Starting from that date, registered platforms will be able to offer securities under Title III of the JOBS Act, and companies to use crowdfunding to offer and sell securities to the investing public.

​We return to discuss US crowdfunding rules, after we covered it extensively in this article by Crowd Valley’s legal counsel, when the SEC adopted the final rules and forms on October 30, 2015, implementing the new Section 4(a)(6) of the Securities Act of 1933, as amended (the “Securities Act”), allowing issuers to sell securities to the public under certain circumstances without registering such securities with the SEC.

The original investor bulletin published by the SEC, is a thorough document explaining what these new rules will mean for small investors. You can read a summary of the rules at Crowd Valley Blog. Here are some highlights:

Virtually anyone can invest in crowdfunding, but since of the risks involved by investing in startups and in early stage companies, there is a transaction limit which depends on your net worth and annual income.

  • If either your net worth or your annual income is < than $100,000, then you can invest, in any 12 month period, up to the greater of either $2,000 or 5% of the lesser of your annual income or net worth.
  • If both your annual income and your net worth are = or > than $100,000, then you can invest, in any 12 month period, up to 10% of annual income or net worth, whichever is lesser. In any case you can’t exceed $100,000 invested per year. 

The minimum level of financial disclosure required depends on the amount of money being raised or raised by the company in the prior 12 months:

  • $100,000 or less — financial statements and specific line items from income tax returns (certified by the principal executive officer of the company).
  • $100,000.01 to $500,000 — financial statements reviewed by an independent public accountant and the accountant’s review report.
  • $500,000.01 to $1 million — if first time crowdfunding, then financial statements reviewed by an independent public accountant and the accountant’s review report, otherwise financial statements audited by an independent public accountant and the accountant’s audit report.

What are the main difference between a crowdfunding investor and a shareholder in public listed company?

1.  The main two differences are: the limited disclosure required for a private company compared to publicly listed company.

2.  The second main difference is the illiquidity of the shares you buy.

Read the whole article and more details at Crowd Valley News.

Crowd Valley crowdfunding rules

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Grow VC Group The Grow VC Group is the world leading, global pioneer of securities crowd funding, peer to peer marketplaces, new investment models and global business development. Established in 2009, the Group has developed new investment models on six continents and continues to innovate the global market.

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This entry was posted on Friday, March 4th, 2016 at 4:00 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.