The Securities and Exchange Commission voted 3-1 to approve the long awaited equity crowdfunding rules. Equity Crowdfunding was adopted pursuant to Title III of the Jumpstart Our Business Act (JOBS Act). As adopted today, the rule allows companies to raise up to $1 million every 12 months in a crowdfunding campaign using an online funding portal or registered broker-dealer.
While the rules do allow non-accredited investors to participate, there are caps on the amounts that may be invested. Commissioner Michael Piwowar had harsh statements for the new rule pointing out the risks to both investors and small companies who failed to comply with the myriad of confusing and complex requirements of the equity crowdfunding exemption. He stated, “I fear that many traps for the unwary are hidden in the regulations, creating potential nightmares for small business owners that fail to place regulatory compliance at the top of their business plans. Such burdens will spook many small businesses from pursuing crowdfunding as a viable path to raising capital”