CrowdFund – the name given to the bill sponsored by Scott Brown, was passed by the US Senate yesterday and given that it had already passed the US House of Congress, this Bill will now become law.
The framework of the bill is particularly interesting in that it only allows crowfunding for websites that are SEC approved. In the UK the equivalent of the SEC is the FSA, and the UK’s FSA recently approved Seedrs.
In addition there is a $1m limit that any business can raise through crowdfunding and there are limits too on how much any individual can invest. These are
- For investors with an income of less than $100,000, investments will be capped at the greater of $2,000 or 5% of income.
- For investors within an income of more than $100,000, investments will be capped at 10% up to $100,000.
In additon, the SEC approved portals are required to offer investor protection, including investor education materials on the risks associated with small issuers and illiquidity.
Interestingly, there is no requirement for the crowdfunding websites to select or filter the opportunities – simply a requirement to limit the amount that business angels can invest.