Monday, April 3, 2017

Regulation Crowdfunding Inflation Adjustments

Limits on the amount of capital that companies can raise through equity crowdfunding just grew a tad.

On March 31, 2017, the Securities and Exchange Commission (SEC) adopted amendments to Regulation Crowdfunding which adjust dollar thresholds and limits to account for inflation.

Specifically, companies that raise capital through equity crowdfunding are now permitted to raise up to $1,070,000 per 12-month period (up from $1 million).

The inflation adjustments also impacted other dollar limits and threshold throughout Regulation Crowdfunding.  For example:

  • The threshold for assessing a crowdfunding investor's annual income or net worth to determine investment limits applicable to such investor increased from $100,000 to $107,000;
  • For a crowdfunding investor whose income or net worth is below the new $107,000 threshold, the maximum amount of securities that can be sold to such investor in a crowdfunding offering has increased from $2,000 to $2,200 [or, if greater, 5% of the lessor of (i) the investor's annual income or (ii) the investor's net worth]; and 
  • The maximum amount that any investor can invest in all crowdfunding offerings in any 12-month period has increased from $100,000 to $107,000.

The SEC was required under the JOBS Act of 2012 to adjust the limits and thresholds under Regulation Crowdfunding to account for the impact of inflation.  Further adjustments are required at least every five years.

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