Last week, Massachusetts released “emergency regulations” legalizing crowd investing in the State. Despite for its current Governor being known as a skeptical of online investing, the State adopted these new rules with an interesting approach and with no legal action, but only using the power of the Secretary of the State and making them immediately effective for their emergency.
Other rules implemented within the emergency regulation for online investing can be summarized as follows:
- The issuer can raise up to $ 1 million without undergoing a financial audit. The limit can be lifted up to $ 2 million if a document resulting from the aforementioned audit is instead produced and distributed to investors.
- Issuers have to disclose a series of documents concerning the company and its business model, the owners, the intended use of offering proceeding and other transparency related documents.
- The investors can invest up to $ 2,000 or 5% of their annual income or net worth - whichever is greater . In case the investor earns more that $ 100,000 a year, the cap moves up to 10 percent of annual income or net worth of the investor - whichever is greater. One’s annual income or net worth can be calculated The person’s annual income and net worth may be calculated jointly with the annual income and net worth of the person’s spouse.
The rules exclude from the possibility of using online investments as a source of finance (both in the form of equity or debt) investment companies and businesses involving petroleum exploration or production, mining, or other extractive industries, among others.
As mentioned earlier, the rules are already into effect and Massachusetts has indeed brought a breath of fresh air in the intrastate crowdfunding movement, not including requirements for platforms operators and giving the possibility to issuers not to undergo a financial audit. We will see Massachusetts’s case will influence other States or even the SEC.
JD Alois (2015).Massachusetts Crowdfunding Exemption Called “A Breath of Fresh Air”. Crowdfundinsider
MASSACHUSETTS CROWDFUNDING EXEMPTION
Image credit to: Tabbiska http://bit.ly/1J0qV2c
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.