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.
Rebirth Financial, the New Orleans-based crowdfunding platform that launched publicly earlier this year, recently unveiled its white-labeled platform.
The platform can be tailored to organizations that want to host their own customized crowdfunding platform. Features include:
- Customized Admin page
Allows organizations to internally approve projects, oversee traffic, view fundraising goal progress, and change website information.
- Unlimited fundraiser pages
These customizable pages support photos, videos, and blogs, can be integrated with social media, and come with IT support.
- Secure lender panel
The lender panel comes with search capability, a variety of payment options, and an anonymous lender option
The platform can be hosted in any currency and in any language.
Rebirth Financial demoed at FinovateFall 2011.
Last week, small business lending platform Rebirth Financial launched nationally to enable small businesses from across the country to secure loans.
The New Orleans-based company first launched in 2010, and has since provided access to millions of dollars in capital to hundreds of small businesses based in the southeast United States.
Along with this launch, Rebirth Financial announced the availability of a new program called the Touch Program. This offering assigns borrowers a lending specialist to provide personalized guidance to help them find the right loan.
Rebirth Financial demoed at FinovateFall 2011 in New York.
Last week, New Orleans-based Rebirth Financial was featured in Forbes. The article highlights multiple case studies in which small businesses were unable to secure financing for future projects and turned to Rebirth Financial for help.
Founded in 2008, the startup assists these borrowers by providing community-funded, peer-to-peer small business loans that average $80,000. CEO Chonchul Gupta describes it as a local stock exchange.
The contributor illustrates the service by describing a brewery owner’s situation:
“In the case of one New Orleans Brewery trying to raise the money to build a canning operation, local lenders could see something national banks couldn’t: people loved their beer, and were going to buy it in droves once it got into cans (they did).”
To learn more about Rebirth Financial, watch its FinovateFall 2011 demo.