Monday, May 23, 2016

Regulation Crowdfunding Investment Limit

The SEC's Regulation Crowdfunding sets forth the rules pursuant to which companies may raise capital through the SEC's equity crowdfunding exemption.  One of those rules sets limits on the amount of crowdfunding investments by any one investor in crowdfunding offerings (by all companies conducting crowdfunding offerings) in any 12-month period.

Specifically,  Rule 100(a)(2) of Regulation Crowdfunding provides:

"The aggregate amount of securities sold to any investor across all issuers in reliance on [the equity crowdfunding exemption] during the 12-month period preceding the date of such transaction, including the securities sold to such investor in such transaction, shall not exceed: 

(i) The greater of $2,000 or 5 percent of the lesser of the investor’s annual income or net
worth if either the investor’s annual income or net worth is less than $100,000; or

(ii) 10 percent of the lesser of the investor’s annual income or net worth, not to exceed an
amount sold of $100,000, if both the investor’s annual income and net worth are equal to or more
than $100,000."

The investment limit (for all crowdfunding investments) for a crowdfunding investor always results in a number:

  • between $2,000 and $5,000; or 
  • between $10,000 and $100,000. 
Put another way, the investment limit for a crowdfunding investor can never be:

  • less than $2,000;
  • more than $5,000 but less than $10,000; or 
  • more than $100,00.
I have developed a handy calculator for determining the investment amount limit for a particular equity crowdfunding investor based upon their income, net worth, and prior crowdfunding investments in the past 12-months. Feel free to contact me if you'd like a copy of the investment limit calculator.

1 comment: