Businesses raising money through private offerings will be able to advertise this opportunity to investors thanks to a rule change adopted today by the Securities and Exchange Commission.
The rule change implements a provision in the Jumpstart Our Business Startups Act,which was signed into law more than a year ago. The elimination of the advertising ban on private offerings should make it easier for startups and other businesses, including hedge funds and venture capitalists, to raise money.
Only accredited investors — individuals with net worth of more than $1 million, excluding their residences, and/or income of more than $200,000 — will be eligible to invest in these businesses. But advertising these opportunities will enable businesses seeking capital to reach more of these investors.
“With general solicitation it will be much easier for investors to find companies they are passionate about supporting,” wrote Mike Norman, of the WeFunder crowdfunding site, in an email to TechCrunch.
That’s good news for businesses seeking investors, but more protections are needed to guard against fraud, said Jennifer Openshaw, president of Finect, an online network for the financial industry.
“Small companies benefit by being able to raise money more easily under the new rules,” Openshaw said, “but history has shown that consumers can be misled and exploited if steps aren’t taken to guard their interests.”
Source: Kent Hoover – Bizjournals