SEC Proposes Crowdfunding Rules

On October 23, 2013, the Securities and Exchange Commission (SEC) released much anticipated proposed rules regarding crowdfunding. The proposed rules provide a framework for the sale of securities under Section 4(a)(6) of the Securities Act of 1933 (Securities Act), as directed by Title III of the Jumpstart Our Business Startups Act (JOBS Act), and come on the heels of the SECs recent issuance of final rules to remove the ban on general solicitation in private placements under Regulation D of the Securities Act. 

While crowdfunding offers smaller issuers the promise of increased access to capital, the proposed rules contain significant restrictions and compliance requirements, which have already generated substantial critical commentary from market participants. The SEC has requested comment on a host of issues relating to the proposed rules. The public comment period ends on February 3, 2014.