WASHINGTON, Oct 23 (Reuters) – Oct 23 (Reuters) – Entrepreneurs and start-up companies looking for investors will be able to solicit over the Internet from the general public under a new proposal issued by U.S. regulators on Wednesday. The “crowdfunding” proposal, if adopted by the Securities and Exchange Commission, would be a major shift in how small U.S. companies can raise money in the private securities market.
Private companies are currently allowed to solicit only accredited investors – those with a net worth of at least $1 million, excluding the value of their homes, or annual income of more than $200,000.
The crowdfunding rule would let small businesses raise up to $1 million a year by tapping unaccredited investors.
It remains to be seen if the plan goes far enough in limiting regulatory costs so that small businesses find crowdfunding desirable.
The measure would still impose a number of disclosure rules and other requirements on small companies and crowdfunding intermediaries.
Rory Eakin, the chief operating officer and founder of CircleUp, a brokerage that offers crowdfunding opportunities to high-net-worth “accredited” investors, said he was initially optimistic about the proposal until he read the fine print.
“It’s hard to imagine attractive companies will take advantage of these proposed rules,” he said, citing a raft of concerns including a requirement for companies to file financial statements every year.
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