Today, the Securities and Exchange Commission is set to announce new rules on crowdfunding that are expected to greatly expand access to ordinary investors to this alternative method of fundraising. Crowdfunding refers to the practice of raising small amounts of money from a large amount of individuals, often through the internet.
To date, crowdfunding has been limited to accredited investors, individuals with net worth in excess of $1 million (exclusive of primary residence) or who earn more than $200,000 per year. However, under the new rules, it is expected that individuals will be permitted to invest up to $2,000, or 5 percent of their annual income or net worth, whichever is greater, in crowdfunding projects over a 12-month period. The new rules will be adopted as part of the final rules under Title III of the JOBS Act.