Through crowdfunding, individuals will be able to invest in start-ups through a broker-dealer or a “funding portal."
Securities Commissioner John Morgan has urged small businesses and entrepreneurs to be aware of the potential regulatory pitfalls in “crowdfunding,” an online money-raising strategy sanctioned by the federal Jumpstart Our Business Startups Act.
Morgan warned small businesses not to start raising money until the Securities and Exchange Commission adopts rules governing crowdfunding. The SEC may complete its rule making in early 2013. Until then, Morgan said, state and federal securities law prohibitions remain in place against publicly accessible Internet-based securities offerings.