Three years after the JOBS Act was made federal law, small investors can finally take a stake in private companies.
Today, new rules from the Securities and Exchange Commission will allow people to invest in companies without having to be registered, as the Wall Street Journal reported.
No longer does someone have to prove they earn over $200,000 a year or have a net worth of at least $1 million before they are allowed to participate in these types of investments.
Kiran Lingam, general counsel at SeedInvest, a crowdfunding platform, told the Journal that the new rules are democratizing something that historically only institutions and the high net worth had access to.
Small investors can join online equity crowdfunding campaigns of up to $50 million.
Up to now, as CNET points out, crowdfunding sites such as Kickstarter and Indiegogo have allowed people to make donations to a business, in exchange for something like a T-shirt or service.
But starting Friday, companies can go to these and other sites to raise money online. Indiegogo plans to enter into investment crowdfunding, according to Crowdfundinsider.
Of course, the prior rules were in place to protect people. While there are new disclosure rules for companies seeking to raise money in this way, some regulators are worried that the requirements don t go far enough and that some investors will be financially hurt.
Above: Indiegogo logo.
