Kiplinger quoted Manatt's Brian Korn, chair of the firm's digital finance and marketplace lending practice, for an article on the risks of equity crowdfunding, often for start-ups. Start-ups that want to raise money from a large number of small investors, rather than primarily from accredited investors, will be doing so under new U.S. Securities and Exchange Commission rules called Regulation Crowdfunding.
Under the new SEC rules, start-ups can raise no more than $1 million in a 12-month period. And firms must provide investors with annual reports - a step they generally may skip by working only with accredited investors. With these and other restrictions, "it's going to be a very costly way of raising capital," said Korn.
Read the article here.