SEC adopts “crowdfunding” rules for start-up businesses: an easy way to bet on the next Google?

Abstract

Purpose

To summarize the technical guidelines for complying with the final crowdfunding rules issued by the US Securities and Exchange Commission (“SEC”) after more than three years of consideration pursuant to the Jumpstart Our Business Startups Act (“JOBS Act”) to permit companies to offer and sell securities through crowdfunding.

Design/methodology/approach

Gives an overview of the JOBS Act and the proposed and final crowdfunding rules issued by the SEC; explains how start-ups and other companies can qualify under the final rules; summarizes the disclosure requirements for the issuers; explains the final rules regarding intermediary platforms; and summarizes the proposed rules to facilitate intrastate and regional securities offerings.

Findings

While new crowdfunding rules will enable start-up companies to raise money through the Internet in ways that were previously prohibited, the success of these rules in helping start-ups to raise capital easily and efficiently is still to be seen, as there are still significant restrictions and procedural hurdles for a would-be crowdfunding issuer, which makes crowdfunding costly, especially compared to other forms of capital raising.

Originality/value

Provides an overview and summary of the rules from experienced securities lawyers so that start-up companies and investors would be able to comply with the new rules.

Citation

Gelfond, S. and Eren, B. (2016), "SEC adopts “crowdfunding” rules for start-up businesses: an easy way to bet on the next Google?", Journal of Investment Compliance, Vol. 17 No. 1, pp. 117-121. https://doi.org/10.1108/JOIC-01-2016-0002