SEC Offers Guidance to Investors on Crowdfunding
The SEC Office of Investor Education and Advocacy ("OIEA") issued a bulletin providing guidance to investors about "securities-based crowdfunding." Starting on May 16, 2016, companies will be able to utilize crowdfunding to offer and sell securities to the investing public.
Specifically, the OIEA's bulletin:
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provides investors with guidance on whether they have sufficient income and net worth to make a crowdfunding investment, and how to calculate their net worth for that purpose;
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explains the method of making crowdfunding investments (i.e., through a registered broker-dealer or funding portal);
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cautions investors about the risk factors involved in crowdfunding investments;
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informs investors about the level of disclosure that crowdfunding issuers are required to make; and
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clarifies the limitations of investors' rights to resell crowdfunding shares.