New Rules Allow Small Businesses and Start-Ups to Raise Capital Online and Through Social Media from Small Investors
Washington, DC - Colorado U.S. Senator Michael Bennet today welcomed the long-awaited announcement from the Securities and Exchange Commission (SEC) that it has approved final rules for crowdfunding. Crowdfunding will provide a new avenue for Colorado small businesses and start-ups to acquire capital while ensuring strong protections for individuals who make small investments in these businesses. Bennet was a lead sponsor of the CROWDFUND Act, which was signed into law in 2012, that initiated the SEC's rulemaking process.
"We look forward to reviewing the final rule. Crowdfunding has the potential to be a powerful tool for small businesses and entrepreneurs to grow their businesses, the economy, and create new jobs," Bennet said. "It can help these businesses raise the capital they need and provide new opportunities for individuals to make investments while ensuring them proper safeguards. As new technologies quickly evolve and advance, we must find new ways to build our innovation economy and support the nascent industries and businesses that will create jobs in the 21st century."
The crowdfunding provisions signed into law provide an alternative to the process for small businesses to raise capital. They allow companies to raise up to $1,000,000 annually through internet websites registered with the SEC.
The law requires the SEC to implement basic marketplace protections for the retail investors seeking to take advantage of this new marketplace. Websites seeking to list companies must register with the SEC and provide investors the basic information about the companies they list.
Crowdfunding companies themselves must provide basic disclosures to investors.
Bennet co-authored the CROWDFUND Act with Senators Jeff Merkley (D-OR) and Scott Brown (R-MA).
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