Across the nation crowd-funding is enabling entrepreneurs and dreamers to bring their ideas to fruition by allowing start-ups to get help from other individuals and businesses.
And as of July 31st, Virginia has been allowing crowd-funding offerings-but in order to protect investors, the State Corporation Commission is implementing new regulations.
Under a new law, businesses will be able to raise funds by selling shares through public advertising. To facilitate low-cost capital formation, the offerings are exempt from the detailed requirements of the Virginia Securities Act. The SCC's Ken Schrad says the new rules are very simple to assure investors that the offerings aren't just "pie in the sky" opportunities.
"It's basically some exemptions to existing securities law regulations that allow for crowd-funding opportunities with limitations: raising up to $2 million, and no more than $10,000 from each investor."
The rules require a business to file a “disclosure statement” with the SCC at least 20 days before starting a crowd-funding offer. They also include reporting requirements so that investors know what they’re funding. Investors will also receive an annual report for three years after an offering closes. Although there are no guarantees of any returns, complaints can be filed with the SCC, which would then investigate. If there are violations, then penalties could be imposed.