With JOBS Act Becoming Law, Crowdfunding Platforms Look To Create Self-Regulatory Body

By Rip Empson via TechCrunch

Today, President Obama signs the JOBS Act into law, legalizing crowdfunding in startups by non-accredited investors, so that anyone and their mother can invest. The new law stipulates that entrepreneurs can now raise money from any and all, however, startups are limited to $1 million per year, and must stick to portals approved by the Securities and Exchange Commission. What’s more, the legislation dispenses with the 500-shareholder rule, which put a limit on the number of shareholders a company was allowed before registering with the SEC (and going public).

The new law gives high-growth companies a longer grace period, or on-ramp, leading up to IPOs, and lifts some of the one-size-fits all regulation that likely has been hampering the IPO market. While this is a big win for startups, it puts significant pressure on the crowdfunding market to self-regulate — which is risky. That’s why 13 equity and debt crowdfunding platforms and insiders have come together to form a leadership group to bring attention to the need — really, requirement — for the industry to develop effective self-regulation, best practices, and investor protection.

As the JOBS Act requires all crowdfunding sites to be members of a national securities association, the group is on a mission to find the best way to do that in a way that encourages the new industry while protecting investors. The "leadership group” is to include members of the crowdfunding industry, (duh), who will be working in collaboration with legal, securities, and SEC experts — many of the same people who helped push the JOBS Act forward.