After 3 years of waiting, what will the new rules look like?
We’ve written before about Title III of the JOBS Act. This long-awaited provision of the 2012 legislation legalizing equity crowdfunding has been expected to open up crowdinvesting to non-accredited investors. For the past three years, two of the most commonly asked questions in the crowdfunding community have been “When will Title III be implemented?” and “What will the Title III rules look like?”
It looks like we’re only a few days away from finally getting answers to these questions. The SEC announced this week that it will hold a meeting on Friday, October 30, 2015 to vote on the final Title III rules. The meeting will take place at 10:00 AM EST this Friday and will likely be live-streamed on the SEC website.
The adoption of Title III will represent the final piece of the JOBS Act puzzle. Title II (which some have referred to as “accredited investor crowdfunding”) was implemented by the SEC in July 2013. This is the provision of the JOBS Act used by equity crowdfunding platforms like PeerRealty. Earlier this year, the SEC adopted Title IV of the JOBS Act, which is better known as Regulation A+. Last year, SEC Chair Mary Jo White set October 2015 as the target date for the adoption of Title III, and it appears that the SEC will meet its target after all.
So what can we expect from the new crowdfunding regulations? The SEC issued proposed Title III rules back in October 2013, and the rules have gone through several rounds of public comments since then. Here’s a brief recap of the proposed rules:
- Issuers may solicit up to $1 million annually;
- Investors with an annual income or net worth of under $100,000 may invest up to 2% of their income or $5,000, whichever is greater, in any one Title III offering. Investors with annual income or net worth over $100,000 can invest up to 10% of either figure; and
- Businesses raising over $100,000 must provide investors with accountant-reviewed financials. Businesses raising over $500,000 must supply audited financials to investors.
Opinions on the proposed rules by crowdfunding industry experts have been mixed, but optimists have noted that the prolonged public comment period may have given the SEC an opportunity to address any concerns. We’ll know much more after Friday, and we’ll analyze the final rules in more detail on this blog next week.
Regardless, the rapid growth of real estate crowdfunding over the past two years demonstrates the potential impact of equity crowdfunding. Real estate crowdfunding has already become a $2.5 billion industry, and providing non-accredited investors with access to these investment opportunities should spur further growth.