The SEC,on Friday, passed long-awaited final rules on crowdfunding, setting the stage for startup companies to raise small amounts of capital online from mom-and-pop investors without the expense and hassles of a formal, registered offering.
The new rules, approved on a 3-1 vote with Republican Commissioner Michael Piwowar dissenting. Among other things, the measures will let private companies raise up to $1 million over a 12-month period via crowdfunding, while capping the amount that individuals can place into such offerings. The rules also set up "funding portals" that will serve as the conduit for linking investors with issuers looking to raise capital.
While the SEC completed the task it undertook three years ago, the new rules also send the agency into uncharted territory as the new crowdfunding rules allow stocks and bonds to be sold to the general public without the registration process which has been the hallmark of federal securities laws for 80 years.
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