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posted by martyb on Monday November 02 2015, @08:52AM   Printer-friendly
from the what-cold-possibly-go-wrong? dept.

Small investors could be permitted to invest in startups online under new U.S. Securities and Exchange Commission (SEC) rules:

America's financial watchdog says anyone with spare cash will be able to buy a slice of a startup online without having to fill out mountains of paperwork.

Until now, if you fancied plowing some of your savings into a fledgling biz — say a trendy but privately held San Francisco tech startup — there are all sorts of requirements and red tape you must overcome, all pretty much put in place after the 1929 US stock market crash.

Under new rules from the SEC, a startup can raise $1m a year by selling stock in itself to investors, although the individual amounts will be regulated. Those with an annual income of up to $100,000 can spend either $2,000 a year or five per cent of their net worth in startups, or 10 per cent if they make more than a hundred grand.

"There is a great deal of enthusiasm in the marketplace for crowdfunding, and I believe these rules and proposed amendments provide smaller companies with innovative ways to raise capital and give investors the protections they need," said SEC chairwoman Mary Jo White. "With these rules, the Commission has completed all of the major rulemaking mandated under the JOBS Act."

From the SEC release:

The new crowdfunding rules and forms will be effective 180 days after they are published in the Federal Register. The forms enabling funding portals to register with the Commission will be effective Jan. 29, 2016. [...] The SEC is seeking public comment on the proposed rule amendments for a 60-day period following their publication in the Federal Register.


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  • (Score: 0) by Anonymous Coward on Monday November 02 2015, @06:30PM

    by Anonymous Coward on Monday November 02 2015, @06:30PM (#257625)

    So one more of the vestiges of the rules we put in place in the 1930s to stop rampant corruption and market crashes is being removed. About the only thing left is FDIC.

    I have advice for anyone thinking of investing like this. *run*. Do not look back. You are more than likely are going to lose all of your money. Do not do it. If you are dead set on doing this. Ask the key questions. What sort of assets are you creating? What is your ROI timeframe? How will you accomplish it? Why do you think this timeframe holds up with that plan? If they can not answer even those 4 questions, RUN. You are not losing an opportunity. They do not know what they are doing and are going to flail around for awhile while they figure out, on your dime.

  • (Score: 1) by khallow on Monday November 02 2015, @09:25PM

    by khallow (3766) Subscriber Badge on Monday November 02 2015, @09:25PM (#257695) Journal

    So one more of the vestiges of the rules we put in place in the 1930s to stop rampant corruption and market crashes is being removed.

    This is one of the many vestiges we can do without. If you want to know how to stop this rule from leading to rampant corruption and market crashes, then continue to keep fraud illegal and don't let me borrow gobs of money to throw on the next kickstarter project. The combination of keeping illegal stuff illegal as well as not letting investors become highly leveraged is all it will take to keep this particular investment feature from becoming a problem.

    I have advice for anyone thinking of investing like this. *run*. Do not look back. You are more than likely are going to lose all of your money. Do not do it. If you are dead set on doing this. Ask the key questions. What sort of assets are you creating? What is your ROI timeframe? How will you accomplish it? Why do you think this timeframe holds up with that plan? If they can not answer even those 4 questions, RUN. You are not losing an opportunity. They do not know what they are doing and are going to flail around for awhile while they figure out, on your dime.

    Good advice. And people will probably often get burned anyway even if they can answer these questions. But the point here is that eventually you'll get a community of founders who consistently deliver results for their investors and investors who know what to ask and what to look for. I think that will more than outweigh the enlargement of this particular way to scam people.