CrowdFunding Rule Comments Under SEC Review

Securities and Exchange Commission

Securities and Exchange Commission

By RUSS GARLAND,Crowdfunding rules that would let ordinary investors back startups are moving closer to adoption by the Securities and Exchange Commission.

Agency staff are just starting their review of comments on a nearly 600-page proposal issued in October to implement a mandate in the 2012 Jumpstart Our Business Startups Act. Comments were due Feb. 3. SEC Chairman Mary Jo White has said that completing the rules are a priority this year.

Startups and entrepreneurs, who stand to benefit from greater access to capital, are concerned that the proposed rules would deter smaller companies from using crowdfunding, as The Wall Street Journal reports.

A key issue is a proposed requirement that companies seeking more than $500,000 release audited financial information. Small firms say this is too costly. Proponents of the provision say it’s needed to protect small investors.

Once the staff review is done, the five-member SEC will vote on the rules.

Startups can already publicly seek capital under general solicitation rules adopted last year by the SEC, however they can only tap accredited investors, who are wealthy individuals and institutions.

Venture capital firms can also raise funds under those rules. Only a few such as New York’s ff Venture Capital have done so. Write to Russ Garland at Follow him on Twitter at @RussGarland

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