Obama signs new crowdfunding law
Rules change. Game on.
“One of the big things about America is that we are a nation of doers. We think big. We take risks. And we believe that anyone with a solid plan and a willingnes to work hard can turn even the most improbable idea into a successful business. Ours is a legacy of Edisons, Graham Bells, Fords, Boeings, Googles, Twitters…this is a country that has always been in the cutting edge, and the reason is that America has always had the most bearing entrepreneurs in the world.”
March 2012 will be the month that we will remember as the month where Rules of Funding changed first time in history. This is HUGE, believe me.
Last week President Obama signed the Jumpstart Our Business Startups Act (JOBS Act) that includes revisions to the 1930s era financial regulations that limited equity funding for start-up businesses.
According to the “Practical e-commerce” article, that you can find HERE, these are the rules that will apply in the future, and that I am quite sure that many countries will follow.
- The law allows an entrepreneur or small business to raise up to $1 million per year through an SEC-registered crowdfunding intermediary. The House bill did not require an intermediary and would have allowed people to raise money via Facebook and other social media websites.
- Intermediaries seeking to help companies raise money through crowdfunding must register with the SEC, make sure investors are advised of the risks they are taking, and take measures to prevent fraud.
- Individuals with an income of less than $100,000 per year are allowed to invest the greater of $2,000 or five percent of their income.
- Individuals with an income of more than $100,000 can invest up to ten percent of income, with a cap of $100,000.
- Companies that use crowdfunding must provide financial statements to investors. Companies seeking to raise $100,000 or less would have to provide tax returns and a financial statement certified by a company principal.
- Companies seeking between $100,000 and $500,000 in capital would have to get independent accountants to review these statements.
- Audited financial statements would be required for companies seeking more than $500,000 in capital.
- Companies can avoid registering with the SEC until they have 2,000 shareholders, up from 500 currently.
I think this is a pretty smart move of the Obama administration to control the money flow and attract capital through this US platforms like Kickstarter or IndieGoGo. According to the “Daily crowdsource” the amount generetad raised to $20.5 million worldwide using such intermediaries, five times more than was raised in 2010.
