Equity Crowdfunding is probably the best friend of growing businesses. It is that innovative idea which has changed the fates of many entrepreneurs. With its increasing popularity, there are some negative things that are being added to the industry. The number of cases frauds and misuse of equity crowdfunding is increasing.
This it the reason why the American Government is constantly making efforts to formulate effective crowdfunding regulations. In order to make these crowdfunding regulations perfect, the government is periodically modifying the rules. Though the rules are quite effective. But there are some changes that still need to be implemented. However, here are the most recent American Equity Crowdfunding Regulations.
Crowdfunding Regulations for Companies
#A company can raise up to $1 Million in a time period of 12 months.
According to the latest crowdfunding regulations, a company can raise a sum total of $1 million in a year. No company can raise funds exceeding this limit. However, if a company wishes to raise more than a million, it does have an option. The company has to consider A+ mini IPO for the same.
#All the companies availing crowdfunding, have to make the following disclosures
- Legitimate current financial status of the company.
- The target amount for crowdfunding, the deadline decided to reach the target, the parameters used to set the target and whether or not the company will accept funding after reaching the set target.
- A detailed description of the company and details of how the company plans to use the funds raised.
Crowdfunding Regulations for crowdfunding platforms
#The crowdfunding platforms have to follow some updated crowdfunding regulations
- All the crowdfunding platforms have to provide some education material to their clients. This should explain the process for investing on the given platform; Investment limits; Security measures taken for the benefit of the investors.
- Additionally, all the platforms have to take certain measures to prevent the cases of frauds on their platform.
- Also, the platform has to provide a communication channel allowing the discussion of offerings. And also provide the mentioned disclosures to all the investors.
- The platform has to comply with maintenance and transmission of the funds. Also, it has to coordinate all the completions, cancellations, and confirmations.
- The platform even has to provide a notice to the investors post the investment commitments.
- Also, a platform must accept investments from an investor only after the investor has .
Crowdfunding Regulations for investors
Apart from the companies and the platforms, the new crowdfunding regulations also limit the investments made.
- In a period of 12 months, an investor can make crowdfunding offerings up to;
- If their net worth or annual income is more than $100,00 then they can invest the greater of:
– $2,000 or
– 5% of the lesser of their net worth or annual income.
2. If the annual income and net worth both are equal to $100,00 then they can invest 10% of the lesser of the two.
- In 12 months, an investor cannot make offerings worth more than $100,000.
The updated American Equity Crowdfunding Regulations are made with many efforts. However, they do have some minuses for the companies. But they are beneficial for everyone from a larger perspective.
