Private Lender by AAPL

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Tearing Down Barriers How the JOBS Act opens deal flow for nonaccredited investors.

it will continue

• Net worth of $1 million or more, excluding the investor’s primary residence

Unaccredited investors—those who don’t

meet the above criteria—were excluded from making equity investments into privately

by Jason Fritton

traded companies.

According to the SEC, about 10 percent

of the population, or about 12.4 million

households, qualify as accredited investors, although others contend the number is far

lower. This means that the vast majority of ordinary citizens were effectively excluded from investing in equity crowdfunding.

But crowdfunding has since evolved from

when it was first introduced in the United

States over a decade ago. With the introduction of Title III, more investors can enter the market for raising capital. And with only a

small portion of accredited investors actively investing in equity shares of private compa-

nies, the JOBS Act is viewed as good for both investors and entrepreneurs.


From Wall Street to Main Street n historic fashion, investing opportuni-

nonaccredited investors—known as Title III (Reg-

Individuals of modest means now have more

ulation CF)—became effective on May 16, 2016.

freedom to participate in investment options that

crowdfunding rules from the Securities and

credited investors, Title III gives small businesses

limitations on nonaccredited investors prior to

Besides opening up a whole new world to

raising capital and takes a seat among other ini-

often $100 to $500, investors can now put their

bootstrapping, friends and family, angel investors

ise to be the next Google, Apple or Facebook.

ties for ordinary Americans took on new

meaning in the spring of 2016 when equity Exchange Commission took effect.

nonaccredited investors, Title III of the JOBS Act (Regulation CF) expanded options for entre-

preneurs to seek out everyday investors to raise capital and grow their companies via online

By opening up equity crowdfunding to nonac-

and early stage startups an alternative method of

this new legislation. With as little as $10, but more

tial capital-raise scenarios that typically include

money into a startup that they believe has prom-

and small business loans.

Until these changes, the sale of securities in

crowdfunding platforms.

private companies were typically only accessible

designed to help small businesses raise capital

in equity crowdfunding, an individual had to

The Jumpstart Our Business Startups Act was

by easing certain securities regulations, and

although the legislation was signed in 2012, it

required the SEC to write new rules. The equity crowdfunding portion of the act that applies to 32 PRIVATE LENDER

weren’t available to them before due to previous

to accredited investors. This meant that to invest have one of the following:

• Annual income of $200,000 a year for the past two years (or a household annual in-

come of $300,000) with the expectation that

But this still isn’t an “anything goes” market-

place. The SEC placed limits on nonaccredited

investors in order to build safety and soundness into this new equity crowdfunding option:

• If a nonaccredited investor has an annual

income or net worth of less than $100,000, then the investor can invest the greater of

$2,000 or 5 percent of the lesser of his or her