Crowdfunding awaits key rules from SEC

SECCongress created equity crowdfunding, but the Securities and Exchange Commission holds the infant industry’s life in its hands.

The Jumpstart Our Business Startups Act, passed almost a year ago, will let privately held companies sell up to $1 million a year in unregistered stock to mom-and-pop investors using the Internet and social media. But they can’t start until the SEC completes the regulations.

The SEC missed its Dec. 31 deadline for publishing the regulations. Given its backlog of rule-making and the fact that its new chairman hasn’t been confirmed, it could be next year before a rule takes effect.

SEC spokesman John Nester would only say, “We will continue working hard amid a busy rule-making agenda to get these crowdfunding rules done as soon as possible and to get them right.”

The SEC will have to balance the capital-raising needs of small companies with the need to protect investors with limited wealth and financial savvy.

Some critical questions remain – how much disclosure companies will have to provide investors, how much personal liability they and their directors will bear for misstatements or omissions in disclosure documents, and whether crowdfunding portals can curate or choose which companies are listed on their platforms.

Read More at SFGate



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