SEC Crowdfunding Regulation

SEC Crowdfunding Regulation - Introduction

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The SEC crowdfunding regulation helps facilitate the growth of EGCs, as mandated by the JOBS Act.

Crowdfunding is funding a project or venture by raising many small amounts of money from many people, typically via the Internet. The SEC adopted crowdfunding regulation in 2015, allowing individuals to invest in securities-based transactions subject to certain investment limits. 

For example, an issuer is limited to the amount of money it can raise and has to meet specific disclosure requirements about its business and securities offering. Regulation Crowdfunding also governs broker-dealers' activities and funding portals in crowdfunding transactions.

The rapid expansion of low-documentation and start-up-phase financing of small projects and businesses has created a need to protect the interests of small businesses seeking capital.

It is appropriately balanced against investment protection and investors' needs for critical information to make investment decisions.

The SEC also adopted amendments to Regulation A to allow smaller companies to offer and sell up to $50 million in securities during 12 months without complying with all requirements applicable to registered securities. As a result, two tiers of offerings (up to $20 million and up to $50 million) are subject to additional disclosure and reporting requirements.

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SEC Crowdfunding Regulation - What to Know?

SEC crowdfunding regulation enables eligible companies to offer and sell securities through crowdfunding. The regulation:

  • All transactions under the Crowdfunding Regulation must be conducted online through an SEC-registered intermediary, such as a broker-dealer or a funding portal.

  • It allows a company to raise $5 million through crowdfunding over a year.

  • Limit the amount that individual non-accredited investors can invest across all crowdfunding offerings in 12 months, and require information disclosure in filings with the Commission, as well as to investors and the intermediary facilitating the offering.

  • Securities purchased through a crowdfunding transaction are generally not resaleable for one year.

Is SEC Flexible With Crypto Crowdfunding?

Yes, recently, the U.S. Securities and Exchange Commission raised its limit on Crowdfunding offerings from $1.07 million to $5 million as part of a package of amendments to its exemption offering framework.

The move should provide cryptocurrency startups with more legal pathways to funding beyond venture capital. 

According to the SEC, "anyone can invest in a securities-based crowdfunding offering," though they are limited to a certain amount based on their annual income and net worth.

Accredited investors no longer have any limits with the amendments voted in today. In contrast, non-accredited investors can use their annual income or net worth to calculate investment limits, thereby increasing the amount they can invest in 12 months.

The Latest Acceptance of Cryptos as Legal Securities by the SEC 

The SEC and other market regulators in the United States are taking the cryptocurrency market seriously.

The SEC determined last year that cryptos are as many securities as equity.

In May, the SEC announced that it would nearly double its crypto assets and cyber unit. Since then, the SEC, Commodity Futures Trading Commission (CFTC), and Department of Justice (DOJ) have become more active in crypto enforcement.

Invest in Crypto Under SEC Regulation Through UFUND 

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Before generating these tokens, concomitantly to token issuance, write related smart contracts to be listed on a designated blockchain platform.

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