Below is an article by SocialFunds.com entitled "Entrepreneurs to Advertise for Investment through Crowdfunding".
Entrepreneurs to Advertise for Investment through Crowdfunding
By: Robert Kropp, SocialFunds.com
September 17, 2013
SocialFunds.com talks with Judd Hollas of EquityNet about the implications of a change in SEC rules that will allow small businesses to advertise to accredited investors for capital.
SocialFunds.com -- The funds for the production of several of my favorite music recordings of recent years—the exquisite Winter Morning Walks, by Maria Schneider and Dawn Upshaw, comes immediately to mind—were raised through crowdfunding, the practice of aggregating small amounts of capital from large numbers of contributors which has become common practice thanks to the Internet.
Crowdfunding can be utilized towards ends other than the production of works of art, of course, and since 2005 EquityNet has hosted an online platform where small businesses can raise capital. EquityNet now has almost 10,000 members, and entrepreneurs have raised more than $207 million through the company's platform.
Come September 23rd, EquityNet will be well-positioned to take advantage of a change in Securities and Exchange Commission (SEC) rules that will take place then. As part of the Jumpstart Our Business Startups (JOBS) Act, which was signed into law by President Obama last year, a ban on advertising to investors will end. The ban has been in place since the Securities Act of 1933.
According to the SEC, “Cost-effective access to capital for companies of all sizes plays a critical role in our national economy, and companies seeking access to capital should not be hindered by unnecessary or overly burdensome regulations.”
The change in rules “permits an issuer to engage in general solicitation or general advertising in offering and selling securities...provided that all purchasers of the securities are accredited investors and the issuer takes reasonable steps to verify that such purchasers are accredited investors,” the SEC stated. Accredited investors are institutions and individuals who are financially sophisticated and thus less reliant on the filings required of issuers by the Commission.
SocialFunds.com spoke recently with Judd Hollas, founder and CEO of EquityNet, about the potential impact of the change in SEC rules relating to advertising.
“Private equity investing with accredited investors has been allowed for decades,” Hollas noted. “Title 2 is going to open the door dramatically for there to be more transparency and awareness in the accredited investor space.”