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A Review of the SEC's Final Rules for Investment Crowdfunding

Mihir Gandhi

It was long awaited by the small business community, and on October 30, 2015, the Securities and Exchange Commission (SEC) adopted final new rules pertaining to how companies can legally ‘solicit' and gain investment from ‘the crowd'.

"Regulation Crowdfunding"

The relevant section of the Securities Act, Section 4(a)(6), has been dubbed "Regulation Crowdfunding". The SEC has amended this section to allow companies to offer investment opportunities via advertising and/or general solicitation to all investors, even those who are unaccredited. In a bid to balance the fundraising needs of the business community with investor protection, the amended section contains a few important restrictions.


Regulation Crowdfunding sets boundaries on how much money an individual can invest. This is determined by the person's net worth and income levels.

  • Individuals whose annual income or net worth is less than $100,000 may only invest the greater of $2,000 or 5 percent of their income or net worth, whichever is lower.
  • Individuals with annual income and net worth in excess of $100,000 are permitted to invest 10 percent of their income or net worth, whichever is lower.
  • The maximum amount that any investor, regardless of which income and wealth category, may only purchase up to $100,000 in Regulation Crowdfunding securities in any 12-month period.


Issuers are limited to raising no more than $1 million in any 12-month period, and are required to disclose information to the SEC, including:

  • What price is the issuer setting for the securities, or the method used to arrive at that price
  • How much capital the issuer plans to raise, in what timeframe, and for what purpose the proceeds will be used
  • If it appears the goal will be surpassed, whether the issuer accept investments beyond that goal
  • Financial statements, tax returns, and depending on the amount of the offering, financial information may need to be reviewed or audited
  • Business description and details about officers, directors, and/or controlling shareholders.

Issuers planning a Regulation Crowdfunding campaign must also engage either a registered broker or a registered funding portal.

It's a lot of pain for only $1,000,000, but it's still a useful tool for companies seeking to raise capital or gain marketing exposure.

Rule 506(c) capital raises have no limit on the amount of capital that can be raised, but require that your investors are accredited. For more information on verifying accredited investors, contact We offer reliable, confidential and secure verification services for both issuers and investors.