On October 23, 2013 the Securities and Exchange Commission (“SEC”) unanimously voted a proposal¹ to allow companies to raise funds by issuing equity through crowdfunding. If passed, the proposal should be good news for all those small to medium companies hoping to increase their fund-raising capabilities by issuing securities and selling them to crowdfunding investors.

Some of the limitations set by SEC under the proposed regulation are:

• A company would be able to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period.
• Investors, over the course of a 12-month period, would be permitted to invest up to:
  1. $2,000 or 5 percent of their annual income or net worth, whichever is greater, if both their annual income and net worth are less than $100,000, or
  2. 10 percent of their annual income or net worth, whichever is greater, if either their annual income or net worth is equal to or more than $100,000. During the 12-month period, these investors would not be able to purchase more than $100,000 of securities through crowdfunding.

The proposal can be found here.

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