Equity Crowdfunding Rules Adopted by the SEC to Promote Capital Raising by Emerging Companies
Financial technology startups now have clarification on how they can use online crowdfunding platforms to raise capital.
On October 30, 2015, the U.S. Securities and Exchange Commission adopted final rules to implement the equity crowdfunding exemption that was added to the federal securities laws pursuant to the JOBS Act. As a result, qualifying U.S.-based start-ups, small businesses and other emerging enterprises – including those in the FinTech industry – will be able to raise up to $1 million per 12-month period by selling their securities to all types of investors in small increments through online platforms maintained by crowdfunding intermediaries (i.e., registered broker-dealers and/or funding portals).
The new rules impose a significant number of requirements, restrictions and obligations on both issuers and intermediaries, including pre-offering and ongoing disclosure obligations and the requirement to take certain steps to prevent fraud. At the same time, however, the new rules have the potential to unlock many new sources of capital for early-stage issuers, which potential has caused many issuers to greet the SEC’s long-awaited action with understandable enthusiasm.
To find out more about the new equity crowdfunding regulations, please see the Pryor Cashman Legal Update entitled "Final Equity Crowdfunding Rules Adopted by the SEC to Promote Capital Raising by Emerging Companies", which is available here.
