Crowdcheck Blog
Insights and information for online capital formation
The President has just (like, a minute ago) signed the JOBS Act of 2012, which includes the authorization for crowdfunding.
So when can we actually start crowdfunding? NOT YET, and please folks, let’s be careful out there. Some cautionary lawyer-talk after the jump.
Two things need to happen before Crowdfunding Launch Date. First, the SEC has to adopt its crowdfunding rules. And second, it has to register funding portals. Because offers and sales of crowdfunded securities cannot be made except through registered portals. (And notice I said “offers” there. More on that below.)
The SEC has 270 days to adopt its rules, which would take us to the end of the year.…
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1. Know what you are buying
Startups can offer equity or debt, or different classes of shares with different rights. Understand what you are buying and what rights you have. In an equity investment, the investor becomes a shareholder, and owns a small part of the business. Whether the shareholder has a vote or not depends on what sort of shares the startup is offering, and you might not have any say in the company's direction. Until the company "goes public" and does an IPO, the only way to get any of your money back is through the private markets: finding an accredited investor (someone rich) to buy your shares, selling the shares back to the company (if…
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Not sure about some of the crowdfunding provisions in the JOBS Act? Well, we'll be providing a plain-language summary of the Act on this site very soon. In the meantime, a couple of the Senators most concerned with crowdfunding have made some very helpful comments that clarify, for example, that crowdfunding portals are allowed to perform due diligence services, and act as holder of record for crowdfunded investments. See Thursday's Congressional Record.
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