Crowdfunding Investor and Issuer Restrictions

May 7, 2012 by

Crowdfunding Investor and Issuer Restrictions

Below, and in future posts ( time permitting) I will take a look at specific portions of the crowdfunding bill.

SEC. 302. CROWDFUNDING EXEMPTION.

(a) SECURITIES ACT OF 1933.—Section 4 of the Securities Act of 1933 (15 U.S.C. 77d) is amended by adding at the end the following:

Company ( issuer restrictions) 

“(6) transactions involving the offer or sale of securities by an issuer (including all entities controlled by or under common control with the issuer), provided that—

“(A) the aggregate amount sold to all investors by the issuer, including any amount sold in reliance on the exemption provided under this paragraph during the 12- month period preceding the date of such transaction, is not more than $1,000,000;

A company (and it’s affiliates under it’s “common control” )  can not offer more then $1,000,000 in crowdfunding in a 12 month period 

          Investor Restrictions -The restrictions below are per investor and not per company– in other words the total amount any investor can invest in all crowdfunding opportunities.

“(B) the aggregate amount sold to any investor by an issuer, including any amount sold in reliance on the exemption provided under this paragraph during the 12- month period preceding the date of such transaction, does not exceed—

“(i)     the greater of $2,000 or 5 percent of the annual income or net worth of such investor, as applicable, if either the annual income or the net worth of the investor is less than $100,000; and

“(ii)   10 percent of the annual income or net worth of such investor, as applicable, not to exceed a max­imum aggregate amount sold of $100,000, if either the annual income or net worth of the investor is equal to or more than $100,000;

Investors with income less then $40,000 and whose net worth is less then $100,000:   can invest up to $2,000 per year in total in all crowdfunding opportunities 

Investors with income more more then $40,000 but less then $100,000 and whose net worth is more then $100,000 : can invest up to 5% of his/her income ( not more then $5,000 in total) 

Investors with income of more then $100,000 or net worth of  more then $100,000 : 10% of income or net worth but, not more then $100,000 in total  

In Summary: The total minimum amount that any individual can invest in total crowdfunding opportunities, with zero net worh or zero income  is $2000 per year. 

The total maximum amount that any individual can invest in total crowdfunding opportunities, (even someone like Bill Gates)  is $100,00 per year in all crowdfunding opportunities.

Interesting Tidbit: someone whose net worth is less then $99,999 and earns $99,999 per year can invest $5,000 but someone who makes 1 dollar more ($100,000)  or  has 1 dollar more in net worth  ($100,000 in net worth)  can invest $10,000 in total .

The ” net worth” calculations  will use the most  recently updated standards outlined by the SEC http://www.sec.gov/info/smallbus/secg/accredited-investor-net-worth-standard-secg.htm.  This means that a person’s primary residence will not be used in calculations of net worth .

 

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