The U.S. Securities and Exchange Commission (SEC) this week unanimously voted to approve the proposed rules that will govern online crowdfunding. Under these provisions, companies will be allowed to offer and sell securities through crowdfunding.
Some of these companies have been waiting since early 2012, when Obama signed the JOBS Act, for the SEC to create the regulation, which is intended to protect private, non-accredited investors.
Investors who earn under $100,000 per year will be limited to $2,000 per year investment, or 5% of their income, and those who make over that amount will be limited to invest 10% of their income annually. However, in order to reduce burdens on the companies raising the funds, and the funding portals, the new regulation does not explicitly require them to verify the income of the individual investors.
According to the SEC’s press release, its proposed rules would require SEC-registered intermediaries (broker-dealers, funding portals) to:
- Educate investors
- Manage the risk of fraud
- Provide information about the issuer and the offering
- Furnish communication channels
- Facilitate the offer and sale of crowdfunded investments
The proposed rules would prohibit them from:
- Offering investment advice or making recommendations
- Soliciting purchases, sales or offers to buy securities
- Restricting compensation for solicitations
- Holding, possessing, or handling investor funds or securities
Before the rules are passed, they must go through a 90-day comment period, after which, they may be altered to reflect the comments. Once the final rules have been decided, the nine Finovate alums below will be able to solicit to non-accredited investors, subject to the SEC’s final ruling.
FinovateSpring 2012 demo
From an operational standpoint, life for these startups will be a bit easier after the SEC passes the provisions, since it will increase the number of investors on their platforms. They will, however, be faced with increased regulation, which Forbes estimates will cost more than $100,000 annually. This estimate includes procuring and offering disclosure documents, enlisting a funding portal, running background checks, and filing an annual report with the SEC.
The first provision of the JOBS Act, which allows companies to advertise to accredited investors, went into effect September 23.
- American Banker reports: Union Bank signs up for Fiserv’s Bill Pay.
- Bolstr featured on MSNBC’s Your Business.
- Backbase gives a glimpse of the Digital Marketing Module it showed at FinovateEurope.
- Triple Pundit looks at how the SEC is holding SoMoLend and other debt/equity crowdfunding platforms hostage.
- CIO lists Expensify as 1 of 3 apps to help at tax time.
- BellaDati releases updates to its platform.
- Med Gadget interviews Diversinet CEO, Dr. Hon Pak.
- Finextra reports Geezeo signs 1st United Services Credit Union.
- CashStar announces availability of tablet gifting.
- Android, iOS updates now provide card-to-card payments with Pageonce.
- Dough Roller blog names PocketSmith one of the best calendar-based personal finance apps.
- Continuity Control to partner with cbanc Network to provide regulatory briefing via RegAdvisor.
- Koolspan and DeviceFidelity team up to build TrustSleeve, bringing microSD-based voice encryption to the iPhone.
- Locaid and Life360 join forces to help parents stay in touch with their kids.
- The Financial Brand highlights 50 of the most spectacular website designs in banking: Simple (formerly BankSimple), Standard Chartered, Mint, & Moven. See Netbanker’s take on the list here.
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.