NOVEMBER 12, 2013• By MARCIA KAPLAN, The U.S. Securities and Exchange Commission has been widely criticized for dragging its feet in issuing implementing regulations for equity crowdfunding, which was enabled when the Jobs Act was signed into law in April 2012. Finally the agency recently issued some new rulings that will hopefully lead to actual implementation of equity crowdfunding in 2014.
In September, new rules went into effect allowing general solicitation and advertising in order to sell securities in a private placement under Section 506 of the Securities Act of 1933. Companies wishing to sell securities are now able to publicize that fact. Unfortunately, this does little to further true crowdfunding because only “accredited investors” (those with a net worth of at least one million dollars excluding a home, or a $200,000 annual income) can participate. The issuer must take “reasonable steps” to verify that all purchasers are accredited investors.
Accredited investors have always had access to equity investing opportunities. As for full access to crowdfunding investment opportunities by the average person that was envisioned when the Jobs Act was passed, the SEC issued the first set of draft rules — here’s a PDF of the proposal — in October. Following are the proposed regulations….