On October 30, the Securities and Exchange Commission adopted final rules under Title III of the JOBS Act (“Regulation Crowdfunding”) to permit a company to offer and sell securities through crowdfunding transactions that raise a maximum aggregate amount of $ 1 million in a 12-month period.  Title III of the JOBS Act, enacted on April 5, 2012, created a federal exemption from the requirement that securities offerings be registered under the securities laws.  In the words of the Commission:   “Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects.”

Specifically, Regulation Crowdfunding permits individuals to invest in securities-based crowdfunding transactions subject to certain investment limits.  In addition to limiting the amount of money an issuer can raise using the crowdfunding exemption, the rules impose disclosure requirements on issuers for certain information about their business and securities offerings, and create a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions.

The Commission also proposed amendments to existing Rule 147 under the Securities Act of 1933 to modernize the rule for intrastate offerings to further facilitate capital formation, including through intrastate crowdfunding provisions.  The proposal also would amend Securities Act Rule 504 to increase the aggregate amount of money that may be offered and sold pursuant to the rule from $1 million to $5 million and apply bad actor disqualifications to Rule 504 offerings to provide additional investor protection.

Regulation Crowdfunding and its related forms will be effective 180 days after they are published in the Federal Register. The forms enabling funding portals to register with the Commission will be effective Jan. 29, 2016.

The SEC is seeking public comment on the proposed rule amendments for a 60-day period following their publication in the Federal Register.

A copy of Regulation Crowdfunding and Adopting Release (33-9974) can be found here.