While start-up owners eagerly await the Securities and Exchange Commission’s regulations for crowdfunding, a handful of broker/dealers are racing to be the first to capitalize on the phenomenon.
An exemption in the Securities Act allows start-ups to conduct a version of crowdfunding today — as long it’s through registered broker/dealers. These intermediaries can issue securities to an unlimited number of accredited investors (typically, individuals with a net worth of more than$1 million, or whose income exceeded $200,000 in the past two years).
A recent crop of broker/dealers are looking to pair with platforms that draw entrepreneurs and potential investors. For instance, New York-based broker/dealer Bendigo, which specializes in global technology, began developing its crowdfunding division, called CrowdClear, a few months ago. The firm announced a partnership with crowdfunding platform Rock the Post earlier this month — together, they’ll allow start-ups to raise funds from accredited investors, while they wait for SEC regulations on public crowdfunding.