On October 30, 2015, The SEC approved equity crowdfunding by a 3-1 vote. Equity Crowdfunding was the last piece of the JOBS Act to be approved. Equity Crowdfunding, stipulated under Title III of the Jobs Act has been in regulatory limbo since April 2012. The JOBS Act has 7 separate titles which has made the most significant rules changes to the financial industry since the 1930s. Title III lifted the ban of general solicitation of Reg D 506 private placements, creating Reg D 506c Private Placements (AKA Crowdfinance) and been in effect since September 23, 2013. Title IV amended Regulation A which is now commonly referred to as Reg A+.
The term ‘Crowdfunding’ has been a general term of art for raising funds through the internet. The crowdfunding concept first became prevalent when popular sites like Kickstarter and Indiegogo offered project creators the opportunity to expose their ideas, hopes and aspirations while asking supporters for needed funds in the form of a donation to make their project come to fruition. Reward Crowdfunding project creators offered their supporters a reward like a T-Shirt, first delivery of product or special acknowledgement, in exchange for their donation. Reward Crowdfunding is not a financial security transaction and supporters (aka backers) not investors therefore not regulated by FINRA or the SEC.
See how the different types of crowdfunding and crowdfinance compare to each other.
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