Magazine article Black Enterprise

Equity-Based Crowdfunding: Recent Proposed SEC Rulings Will Make It Easier for Startups to Access Capital, Sell Securities

Magazine article Black Enterprise

Equity-Based Crowdfunding: Recent Proposed SEC Rulings Will Make It Easier for Startups to Access Capital, Sell Securities

Article excerpt

THE SECURITIES AND EXCHANGE COMMISSION HAS proposed rules for Title III of President Obama's JOBS Act, which will permit startups and intermediaries (known as funding portals) to finally participate in equity-based, online crowdfunding When Title III is implemented, which is projected to be spring of 2014, non-accredited investors--those with a net worth of less than $1 million--will be able to invest in small businesses for the first time in 80 years. Conversely, the proposed rules will allow business owners to sell securities online to anyone who believes in their companies, not just accredited investors.

This seismic shift in securities law could mean the freeing up of capital for minority- and women-owned businesses, which traditionally have struggled to access capital. More minorities and those with a net worth of less than $1 million will be able to get in on investments that may drive more wealth generation to their communities. The SEC is seeking public comment on the proposed rules for 90 days before adopting them.

It is certainly a game changer, says William Michael Cunningham, owner of Washington, D.C.-based Creative Investment Research Inc., an investment research and consulting firm, and the founder of BlackCrowdFunding.net, a social funding and project listing website.

"Despite the fact that the SEC has no black commissioners and few staff, African Americans should be among the primary beneficiaries of this new law," he says. "We have strong networks, so fraud should not be an issue. …

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