Will Crowdfunding Recommendations Recently Posted to the SEC’s Website Be Approved at April 10th Meeting?

by Ronald Orol, The Deal Pipeline

Washington, DC – An influential advisory committee to the Securities and Exchange Commission is set to vote Thursday on a package of recommended protections for investors who put money in private “crowdfunding” portals. Creation of the portals was a key provision in the Jumpstart Our Business Startups Act, which was enacted to ease restrictions on entrepreneurs and lower their costs of raising capital.

Ronald Orol, The Deal Pipeline

At issue is a 295-question crowdfunding proposal introduced by the SEC in October. Recommendations made by the Investor Advisory Committee, which is made up of outside investors, academics and consumer advocates, are often added to SEC rules.

People familiar with the recommendations, which were posted recently to the SEC’s website, contend they will be approved by the full investor advisory panel at Thursday’s meeting.

One key recommendation would allow investors to allocate only 10% of their yearly income or assets only if they have both an annual income of $100,000 and a net worth of the same amount.

That’s more restrictive than the SEC’s current proposal, which allows investors to contribute up to 10% of their yearly income or assets to these startup companies if they have a net worth of $100,000 or they earn $100,000 annually. The Deal first reported in March, citing people familiar with the situation, that the panel was set to make this recommendation.

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