The SEC proposed rules this week implementing the crowdfunding provisions of the JOBS Act. Under the proposed rules:
- A company would be able to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period.
- Investors, over the course of a 12-month period, would be permitted to invest up to:
- $2,000 or 5 percent of their annual income or net worth, whichever is greater, if both their annual income and net worth are less than $100,000.
- 10 percent of their annual income or net worth, whichever is greater, if either their annual income or net worth is equal to or more than $100,000. During the 12-month period, these investors would not be able to purchase more than $100,000 of securities through crowdfunding.
- Certain companies, including SEC reporting companies and companies that have no specific business plan, would be ineligible to use the crowdfunding exemption.
- Securities purchased in a crowdfunding transaction could not be resold for a period of one year.
- Companies conducting a crowdfunding offering would be required to file certain information with the SEC, provide it to investors and the relevant intermediary facilitating the crowdfunding offering, and make it available to potential investors.
- Crowdfunding transactions would be required to take place through an SEC-registered intermediary – either a broker-dealer or a funding portal.
The Commission will seek public comment on the proposed rules for 90 days.