Equity crowdfunding has been a flop for startups in the US due to the complexity of a framework which has confused for many involved in the process, experts argue. Now, a new set of proposals recently announced by the Securities and Exchange Commission (SEC) aims to create a more rational framework to allow entrepreneurs to better access capital while preserving and enhancing important investor protections.
WHAT’S IN IT?
Proposed amendments would provide a more rational framework, eliminate complexity and increase access to capital while preserving and enhancing important investor protections, a press release states.
In particular, the set of amendments promises to harmonize, simplify, and improve the exempt offering framework to promote capital formation and expand investment opportunities while preserving and enhancing important investor protections.
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For example, under the proposed rules an issuer in a qualified opportunity zone would have a clearer framework for how to conduct exempt offerings targeted to various investors, including community members, while still complying with important investor protections.
What’s new in particular for equity crowdfunding? The Commission proposed revisions to the current offering and investment limits for certain exemptions:
- Raise the offering limit from $1.07 million to $5 million;
- Amend the investment limits for investors in offerings by:
- Not applying any investment limits to accredited investors;
- Revising the calculation method for investment limits for non-accredited investors to allow them to rely on the greater of their annual income or net worth when calculating the limit on how much they can invest.
Last but not least, a proposed rule amendment would permit issuers to “test-the-waters” prior to filing an offering document.
Find out more here.