The Securities and Exchange Commission voted unanimously Wednesday to publish for public comment its congressionally mandated rules under Title III of the JOBS Act that would permit startups and small businesses to raise capital by offering and selling securities through crowdfunding.
The rules would “permit crowdfunding to begin,” said SEC Chairwoman Mary Jo White. “We want this market to thrive, in a safe manner for investors.”
The rules would limit the amount of money a company can raise and the amount an individual can invest, require companies to disclose certain information about their offers, and create a regulatory framework for the intermediaries that would facilitate the crowdfunding transactions.
As the SEC explains, one of the key investor protections Title III provides for crowdfunding is the requirement that crowdfunding transactions take place through an SEC-registered intermediary, either a broker-dealer or a funding portal. Under the proposed rules, the offerings would be conducted exclusively online through a platform operated by a registered broker or a funding portal, which is a new type of SEC registrant.
When Congress passed the JOBS Act, it directed the SEC to adopt rules to implement the new regulatory structure for crowdfunding, which as White noted, is a term that has come to describe an evolving method of raising money using the Internet.