Crowdfunding and the JOBS Act

Crowdfunding as it relates to business investment solicitation is an outgrowth of more philanthropic-inspired crowdsourcing. Such initiatives, typically, seek via the internet, funding for projects from others. The Jumpstart Our Business Startups Act (JOBS) was signed into federal law in April, 2012 with the aim of creating more small business investment opportunity for companies that could then add jobs to boost the economy. To date, final SEC regs pertinent to businesses soliciting non-accredited investors over crowdfunding platforms have not been finalized. October 31, 2013 is the established deadline.

JOBS Act rules being formulated relate to accounting methods, owner compensation, investment parameters, and other material business background information that might influence crowdfunding investor decisions. Generally, much less disclosure is required than in a more traditional IPO prospectus process so the legislative concern is that there can be more risk involved for those that might contemplate such an investment. Conversely, over-regulation can stifle smaller initiatives unable to satisfy any new requirements. In the meantime, entrepreneurs wait as they continue to experience tepid loan appetites from banks and other traditional lending sources.

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