SEC Requires Compliance For Start-Ups Seeking Crowdfunding
The Securities and Exchange Commission (SEC) has specific requirements for crowd funding campaigns that involve the offer and sale of securities. These requirements are intended to protect investors and ensure that they have the necessary information to make informed decisions about whether to invest in a particular campaign.
Under the Jumpstart Our Business Startups (JOBS) Act, which was signed into law in 2012, companies are allowed to offer and sell securities through crowd funding platforms. However, there are several key requirements that companies must meet in order to do so:
- Companies must use a registered crowd funding portal or broker-dealer to conduct the crowd funding campaign.
- Companies must provide certain disclosures to investors, including information about the business, the use of proceeds from the offering, and the risks associated with the investment.
- Companies are limited in the amount of money they can raise through crowd funding. The limit is based on the size of the company and the type of securities being offered.
- Companies must comply with any ongoing reporting requirements.
It is important for companies and investors to be aware of these requirements and to ensure that they are being followed. Failure to comply with these requirements can result in legal consequences for the company and its management.