The Securities and Exchange Commission (“SEC”) recently released a primer for prospective investors that wish to partake in the new crowdfunding regime. As a reminder, starting May 16, 2016, companies can use crowdfunding to offer and sell securities to the investing public.
On February 16, 2016, the SEC’s Office of Investor Education and Advocacy issued an investor bulletin relating to crowdfunded offerings. The bulletin is intended to help educate investors about the opportunities, and the risks, arising from these offerings.
The alert outlined the limits, which depend on net-worth and annual income:
- If either your annual income or your net worth is less than $100,000, then during any 12-month period, you can invest up to the greater of either $2,000 or 5% of the lesser of your annual income or net worth.
- If both your annual income and your net worth are equal to or more than $100,000, then during any 12-month period, you can invest up to 10% of annual income or net worth, whichever is lesser, but not to exceed $100,000.
The bulletin also contains some great examples to illustrate the 12-month investment limit that applies to unaccredited investors under the new rules and also provides some examples, as to help an investor calculate his or her net worth for purposes of determining this investment limit.
The full bulletin may be found at the following link: https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html.
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