Author Topic: Deciphering the new SEC crowdfunding rules  (Read 1300 times)

simpleminded

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Deciphering the new SEC crowdfunding rules
« on: May 13, 2016, 09:24:03 PM »
I'm not an expert in securities regulations, and I'm just trying to figure out where I fit in under the new rules.

1) is the net worth calculation for the investing limits the same as the advice given for determining whether or not you are an accredited investor? I found this useful PDF with examples: https://www.sec.gov/investor/alerts/ib_accreditedinvestors.pdf

2) in my calculation, how does my spouse weigh in -- is this based on our total income and net worth? if we are 'one person' for SEC purposes, does this mean that we share the maximum amount we can invest between the two of us?

Thanks,
s.

forummm

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Re: Deciphering the new SEC crowdfunding rules
« Reply #1 on: May 14, 2016, 06:54:07 AM »
I'm not encouraging anyone to do anything dishonest. But is there any enforcement mechanism if you were somewhat under the new standards but invested anyway? My limited understanding of the situation is that it's self-policing. But I'm not an active investor in this way so I'm not certain this is the case.

PhysicianOnFIRE

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Re: Deciphering the new SEC crowdfunding rules
« Reply #2 on: May 14, 2016, 09:21:06 PM »
I filled out a survey with RealtyShares to become an accredited investor. It took a couple minutes to complete. I was honest, but I don't believe anything was verified or even verifiable.

Like forummmmmmmmmmm says though, there is a reason for the status. The SEC doesn't want you risking money you can't afford to lose.

Best,
PoF

seattlecyclone

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Re: Deciphering the new SEC crowdfunding rules
« Reply #3 on: May 15, 2016, 01:08:52 AM »
Is there some specific part of the guidelines at https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html that you don't understand? There's a lot in there but it all seems fairly clear to me. I wasn't aware how low the annual limits to this are. They're based on the lesser of your income or net worth. If you're planning to retire early with over $1 million in the bank but income of $50,000 (for example), you can only invest $2,500 per year (5% of $50,000) in crowdfunding platforms.

But if you do have over $1 million you're likely an accredited investor. It's not clear how much (if at all) these regulations affect accredited investors, since they might just be able to buy shares directly from the company without going through the crowdfunding platforms. I could be mistaken about that though; I'm generally pretty happy with index funds so I haven't really looked very closely into what is and is not available to accredited investors outside the public markets.

forummm

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Re: Deciphering the new SEC crowdfunding rules
« Reply #4 on: May 15, 2016, 07:48:48 AM »
http://www.nytimes.com/2016/05/15/business/dealbook/new-crowdfunding-rules-let-the-small-fry-swim-with-sharks.html

It sounds like you don't need very much money at all to invest in crowdfunding offerings.

And, once you do invest in them, you probably will have even less money ;)