Brokerdealer.com blog update courtesy of extract from the New York Times.
For most start-up businesses, money to finance the business is a key issue, in recent years, start-up businesses have been turning to crowdfunding.
Crowdfunding is raising money contributions from a large number of people, typically through the use of the Internet. Some of the more popular crowdfunding sites include GoFundMe and Kickstarter.
These kind of small businesses are the ones President Obama wanted to help in 2012 when he signed the Jumpstart Our Business Startups Act, better known as the JOBS Act. Part of the law, Title III, was intended to allow small businesses seeking capital to crowdfund, or raise money from virtually anyone, by selling stock and other securities over the Internet. “Start-ups and small business will now have access to a big, new pool of potential investors,” Mr. Obama said at the time. “For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in.”
Congress directed the Securities and Exchange Commission to finalize the rules by December 2012, but the agency has yet to do so. As it reviews Title III of the JOBS Act, a debate has raged. Supporters say crowdfunding is an innovative way to finance new ideas. Others say the high risk associated with backing early-stage businesses is inappropriate for ordinary investors.
Only accredited investors — those with annual income of more than $200,000 or $1 million in net worth not including their primary residence — are permitted to participate in crowdfunding deals. Under the proposed rules, which the S.E.C. introduced in October 2013, businesses could raise up to $1 million in a 12-month period without registering the offering with the agency.
“The goal is to democratize and improve finance,” said Representative Patrick T. McHenry, Republican of North Carolina, who worked on the House crowdfunding bill that was incorporated into the JOBS Act.
In writing its rules, the S.E.C. adopted strict requirements intended to minimize fraud and protect investors. Individuals who are not accredited investors, for instance, would face limits on how much they could invest. Businesses would be required to go through a registered broker or a new type of registered platform called a funding portal for their offerings. Businesses also would be required to submit audited financial statements. The rules are still under review and may change.
While the rules are still under review having a brokerdealer in your corner to help find smart investments to make whether it is in a small company or large corporation.
For the full story from the New York Times click here