By Jamie Herzlich
The Securities & Exchange Commission recently unveiled its long-awaited proposed rules for equity crowdfunding. The 585-page proposal lays the framework that would allow businesses to raise up to $1 million a year from the public via online crowdfunding portals.While the rules contain some contentious points that might prove onerous to startups — particularly one that would require firms raising more than $500,000 to submit audited financial statements — experts say they’re a step in the right direction. “I think the fact we have proposed rules is great,” says Jason Best, co-founder of Crowdfund Capital Advisors in San Francisco and co-author of “Crowdfund Investing for Dummies” (Wiley; $26.99).
The industry’s been awaiting the rules since passage of the Jumpstart Our Business Startups Act in April 2012, paving the way for one of the largest changes in securities laws in 80 years.
Long Island businesses are already making use of Title II of the JOBS Act, which went into effect in September and lifted the ban on private companies, including startups, doing “general solicitation” — advertising investment opportunities — to “accredited” investors. Accredited investors include high-income or high-net-worth individuals.
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