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Alternative Market Briefing

SEC approves crowdfunding rules

Thursday, October 24, 2013

Bailey McCann, Opalesque New York:

The Securities and Exchange Commission (SEC) proposed what could be the final version ofcrowdfunding rules included under Title III of the JOBS Act, at a meeting held today. Crowdfunding describes an evolving method of raising capital that has been used outside of the securities arena to raise funds through the Internet for a variety of projects ranging from innovative product ideas to artistic endeavors like movies or music. Title III of the JOBS Act created an exemption under the securities laws so that this type of funding method can be easily used to offer and sell securities as well. The JOBS Act also established the foundation for a regulatory structure for this funding method.

A number of crowdfunding websites already exist, and these rules may well serve to expand and better police that ecosystem. Under the rules, a company would be able to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period. Over the course of that same 12 month period, investors themselves would be limited to investing $2,000 or 5 percent of their annual income or net worth if they are worth under $100,000. If they are worth $100,000 or more, investors are capped at 10 percent of their annual income or net worth, whichever is greater but no more than $100,000. Companies will be able to market to these potential investors through the ......................

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