Ellen Grady, a member of Cozen O’Connor’s Corporate practice group, discusses new capital raising opportunities for startups when the SEC’s crowdfunding regulations go into effect in Entrepreneur magazine. On Monday, May 16, 2016, the SEC’s new regulations will permit businesses to raise capital through equity crowdfunding, which was mandated by the Jumpstart Our Business Startups Act (JOBS Act) passed in 2012. This is an exciting change for startups because the new regulations will expand the pool of prospective investors who can provide capital to businesses in exchange for equity. Ellen explains the significance noting, “For the first time, anyone can become an investor in a business and be able to share in its profits and growth regardless of income, net worth or level of financial sophistication, and this will open up a new source of potential financing for entrepreneurs, which could be a game changer.” Prior to the new rules, only accredited investors with a net worth of at least $1 million, or net income annually of at least $200,000 (or $300,000 jointly with their spouse), could invest in privately placed equity in startups.
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