SEC Opens Comment Period on Proposed Equity Crowdfunding Rules

Once final, the rule will prescribe how equity funding portals such as Lending Club, Funding Circle and Dealstruck as well as crowdfunding investment brokers that help startups raise equity capital, charge for their services, register securities, advertise offerings, qualify investors and keep records. Congress laid out the foundation of a regulatory structure for such sites in Title III of the JOBS Act of 2010, which sought to expand the fundraising options available to startups and small businesses in the wake of the 2008 collapse of small business credit. 

 

While dozens of entrepreneurs have raised millions of dollars to finance the manufacture of new sporting goods products in exchange for product via so-called rewards-based crowdfunding sites such as Kickstarter and Indiegogo, Title III will allow entrepreneurs to raise capital by selling pieces of their company to equity investors who might otherwise be very difficult and/or expensive to locate, qualify and pitch. 

 

More details and instructions for submitting public comments on the proposed rule may be viewed at the Federal Register. http://www.sec.gov/rules/proposed/2013/33-9470.pdf