SEC Finalizes Long-Awaited Title III Crowdfunding Rules
The long awaited SEC Title III crowdfunding final rules have arrived.
The new rules will open the equity crowdfunding gates to non-accredited investors. Non-accredited investors include individuals: (A) with a net worth less than $1 million, or (B) who have an annual gross income of less than $200,000 (or $300,000 together with their spouse). In other words, businesses will now be permitted to utilize crowdfunding to raise capital by selling their securities to “everyday folks.”
Below are some of the key highlights from the new rules.
- An issuer is permitted to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period.
- Individual investors, over the course of a 12-month period, are permitted to invest in the aggregate across all crowdfunding offerings up to:
- If either their annual income or net worth is less than $100,000, then the greater of:
- $2,000; or
- 5 percent of the lesser of their annual income or net worth.
- If both their annual income and net worth are equal to or more than $100,000, then 10 percent of the lesser of their annual income or net worth.
- During the 12-month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000.
- Issuers conducting a crowdfunding offering must file certain information with the SEC and provide this information to investors.
- Crowdfunding transactions must take place through an SEC-registered intermediary, either a broker-dealer or a funding portal.
The final crowdfunding rules will become effective 180 days following Federal Register publication.
We will provide a more detailed analysis of the new rules in the near future. Stay tuned!
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