SEC Releases Crowd Funding Rules for Non-Accredited Investors Under the JOBS Act.

On October 25, 2013, The Securities and Exchange Commission (SEC) released the Proposed Rules to govern the implementation of crowd funding by non-accredited investors under the JOBS Act. Comments will be open for a 90 day public comment period from the date that the proposed regs appear on the Federal Register. (As of this writing, the proposed regs have not yet been posted.)

The Securities and Exchange Commission is proposing for comment new Regulation Crowdfunding under the Securities Act of 1933 and the Securities Exchange Act of 1934 to implement the requirements of Title III of the Jumpstart Our Business Startups Act.

Regulation Crowdfunding would prescribe rules governing the offer and sale of securities under new Section 4(a)(6) of the Securities Act of 1933. The proposal also would provide a framework for the regulation of registered funding portals and brokers that issuers are required to use as intermediaries in the offer and sale of securities in reliance on Section 4(a)(6). In addition, the proposal would exempt securities sold pursuant to Section 4(a)(6) from the registration requirements of Section 12(g) of the Securities Exchange Act of 1934. (Source: SEC.gov)

In July, the SEC opened up crowd-funding to accredited investors, defined as banks, investment firms or charities with assets over $5 million, and individuals with a net worth over $1 million or an annual income over $200,000. The new proposed regulations address the long awaited guidelines for non-accredited investors.

Under SEC’s proposed rules for non-accredited investors, online crowd-funding transactions would have to be conducted through a registered broker or a funding portal. For individuals with an annual income or net worth less than $100,000, individual investments in a 12-month period would be limited to the greater of $2,000 or 5% of annual income or net worth. For individuals with annual income or net worth over $100,000, individual investments would be limited to 10% of annual income or net worth, with a cap of $100,000 in a 12-month period.

There is no limit on the amount of money small businesses can raise from accredited individual investors in a 12-month period under JOBS. However, under the law companies can raise a maximum of $1 million from non-accredited investors.

The SEC is Requesting Comments

The SEC is requesting public comments ands will make all comments received available for public review . The Commission will post all comments on the Commission’s Internet website .

Click here to review the Proposed Rules

How to Comment

Comments may be submitted to the SEC by any of the following methods: (Please only use ONE method.)

Electronic Comments:

Via the SEC Internet Comment Form
Via email to rule-comments@sec.gov referencing File Number S7-09-13 on the
subject line
Via the Federal eRulemaking Portal

Paper Comments:

Paper comments (letters) may be sent in triplicate to:

Elizabeth M. Murphy, Secretary, Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549-1090

All submissions should refer to File Number S7-09-13.
FOR FURTHER INFORMATION CONTACT:

With regard to requirements for issuers, Sebastian Gomez Abero or Jessica Dickerson, Division of Corporation Finance, at (202) 551- 3500
With regard to requirements for intermediaries, Joseph Furey, Joanne Rutkowski, Leila
Bham, Timothy White or Carla Carriveau, Division of Trading and Markets, at (202) 551-5550,
Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549.