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TechTalk Blog - US Securities & Exchange Commission To Issue SME Crowdfunding Rule

By David Colgren posted 05-12-2016 11:18 AM


Great article in the Wall Street Journal yesterday about new US SEC Crowdfunding Rule that goes into effect MONDAY - next week. The article by Ruth Simon of the WSJ provides great background and specifics about the rule and how small companies and investors can utilize crowdfunding to obtain capital directly from Main Street, USA.

FYI. Liv Watson, Senior Director Strategic Customer Initiatives at Workiva and member of the IMA Technology Solutions Practices Committee gave us an alert yesterday from the International Organization of Securities Commissioners IOSCO Annual Conference in Lima, Peru that this SME Crowdfunding Rule would be finalized when Mary Jo White, Chair of the US Securities & Exchange Commission addressed delegates attending the global securities regulator/ stock exchange conference and spoke of the significance to the SME capital markets place and crowdfunding. Management accountants work closely inside the finance teams of both public and private companies. The IMA represents the most CFOs of any association on the planet.

Starting on Monday, SMEs can raise as much as a million dollars online from ordinary investors during a 12-month period. Through crowdfunding portals companies can use the Internet to get the word out on Main Street about the investment opportunities available to their company.  Today, more than 12 million small companies drive US economic prosperity and innovation.

From the WSJ Article yesterday:

“Under the new rules, companies must raise money through a registered broker-dealer or a funding portal approved by regulators. Ten broker-dealers have told regulators they plan to participate, while more than 40 firms have applied to become portals, according to the Financial Industry Regulatory Authority, a self-regulatory group.

As of early Wednesday, Finra had approved five of these portal applications. Four applications have been withdrawn, according to the Securities and Exchange Commission. The others “are pending either the submission of required information or are just under review,” a Finra spokesman said.

Thirty-one states and the District of Columbia already allow local firms to raise money from area residents, but few companies have taken advantage of the opportunity to tap into crowdfunding and bring on investors.

Under the rules, individuals with income or net worth of less than $100,000 can invest the greater of $2,000, or 5% of either their annual income or net worth, whichever is lower, in small-scale securities offerings in a 12-month period. Investors with income and net worth of at least $100,000 can invest up to 10% of their annual income or net worth, whichever is lower.

Stay tuned as we learn more about the new US SEC Crowdfunding and also the possible use of XBRL as the data format for regulatory reporting to the US SEC.

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