Equity Term

In 2012 the US Congress passed Jumpstart Our Business Startups Act, or the JOBS Act. It was a major revision to securities law in that it enabled crowdfunding for both equity and debt securities.

In response the Securities and Exchange Commission (SEC) allowed online securities crowdfunding that targets accredited investors in September 2013. The SEC’s rules for “Main Street” securities crowdfunding went into effect in May 2016. Since one of the many rules of Main Street crowdfunding is that online portals must be registered with the SEC as broker/dealers, Main Street securities crowdfunding in the US began in earnest in late 2016.

JOBS ACT for Equity and Debt

Much attention has focused on equity crowdfunding. However, the JOBS Act also enables corporate bonds and other debt securities to be offered through crowdfunding.

While equity and debt securities crowdfunding can be a good choice for some companies, there are many rules and restrictions so it is not the best choice for many seeking financing. It is not a DIY crowdfunding option like Kickstarter or GoFundMe. At a minimum, a good securities lawyer and a registered online portal will be needed to make sure regulations are followed.

Don Gooding

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