Crowdfunding consists of an online money-raising strategy that invites the public to allocate money, oftentimes through social networking websites, to help finance projects or causes. Through the JOBS Act, small businesses and entrepreneurs will be able to sell equity directly to investors in order to finance their business ventures as soon as the Securities and Exchange Commission (SEC) adopts rules. A crowdfunding equity raise can have an unlimited number of investors but is limited to $1 million. These rules are expected to go into effect sometime in 2013.
Although the Securities and Exchange Commission has yet to write crowdfunding rules, SEC officials have stressed that it is important to include meaningful and effective "bad actor" rules that will disqualify securities law violators, brokers with revoked licenses, and other fraud operators from using exemptions from the securities registration requirements. State securities regulators were against the measure and petitioned Congress not to sign off on the legislation. State regulators believe that the law was essentially opening the door for those with a history of defrauding investors.
Once crowdfunding gets the green light, deals must take place on SEC registered websites. Deals will also require numerous investors, not just one or two as in the Prodigy and Synergy cases. Legislation also requires an issuer to hit 100% of their capital raising target portrayed on an SEC-registered website.
Have you suffered losses in a fraudulent or misleading sale of unregistered securities? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at email@example.com for answers to any of your questions about this blog post and/or any related matter.