The Securities and Exchange Commission voted 5-0 to propose “crowdfunding” rules that would allow startups and entrepreneurs to tap large numbers of ordinary investors for small amounts of capital, Andrew Ackerman writes.
The SEC will now collect comment and then vote again on the proposal, which stems from the JOBS Act. Ackerman writes:
Supporters believe equity crowdfunding will provide new sources of capital for companies overlooked by venture capitalists because they are too small. They point to successes on existing crowdfunding platforms such as Kickstarter, where entrepreneurs collected more than $10 million in donations for the Pebble digital watch, among other ventures.
Critics warn that the rules can let bad actors target unsophisticated investors.