SEC Proposes Crowdfunding Rules Under JOBS Act
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2013-10-30
On October 23, 2013, the Securities and Exchange Commission proposed rules under the JOBS Act that would permit startups and other businesses to raise investment capital through “crowdfunding”—the process of seeking relatively small investments from a broad group of investors via the Internet. Crowdfunding has historically not been used to raise investment capital (as opposed to being used, for example, to solicit donations) because offers and sales of securities to the public generally require compliance with the registration requirements of the Securities Act of 1933.
The proposed rules provide a limited exemption from the Securities Act registration requirements in order to—
- permit companies to raise investment capital through crowdfunding, up to certain offering-size and per-investor dollar thresholds;
- require disclosure from companies raising capital; and
- create a regulatory framework for intermediaries that facilitate crowdfunding transactions.