On October 23, 2013, the Securities and Exchange Commission (the “SEC”) proposed long-awaited rules that would implement Title III of the Jumpstart our Business Act (the “JOBS Act”), known as “crowdfunding.” Congress envisioned that allowing crowdfunding would provide small businesses and startups with an alternative source of capital by allowing them to raise small amounts of money from a large number of investors over the Internet. To date, the sale of securities through crowdfunding has been illegal in the United States, so that companies that wish to engage in crowdfunding have been relegated to in-kind and other non-equity crowdfunding such as providing cash investors with products or subscriptions. The SEC’s proposed rules, which are open for public comment for 90 days from their release and which could still change significantly at adoption, will when adopted support and advance the JOBS Act framework. The proposed rules create an opportunity for eligible companies to raise up to $1 million on a 12-month rolling basis from a large pool of individual investors over the Internet. Investors will not need to meet any sophistication or wealth thresholds, although they will be limited in the amount of money they will be permitted to invest in any 12-month period. Crowdfunding offerings will need to be conducted through a registered broker or a registered funding portal (a new type of entity envisioned by the JOBS Act). Crowdfunding also will be restricted to online-only platforms, such as Internet sites, smartphone apps or other electronic mediums. To engage in a crowdfunding offering, an issuer will need to make substantial disclosure in its offering materials about its business, key personnel and financial condition, including furnishing complete financial statements that will need to be certified by an officer, reviewed by independent accountants or audited depending on the issuer’s target offering amount. After successfully completing a crowdfunding offering, the issuer will be required to file annual reports with the SEC until it becomes a public company, no longer has any shareholders who purchased securities through the crowdfunding exemption, or dissolves or liquidates.