The crowdfunding provisions of the JOBS Act, which President Obama signed into law on April 5, are intended to make it easier for entrepreneurs to raise small amounts of capital from individual investors. The new law allows private companies to raise up to $1 million annually, and the transactions can take place over websites that register with the U.S. Securities and Exchange Commission. The SEC has 270 days to write the rules and set up the registration process; the law is expected to take effect after that, most likely in early 2013.
The forthcoming changes are prompting concern that scammers will descend on the fledgling market and mire it in fraud, says Sara Hanks, a longtime securities attorney who served as general counsel for the TARP Congressional Oversight Panel under Harvard professor and current Senate candidate in Massachusetts Elizabeth Warren. “There will be unregistered people cropping up [to offer small business equity investments] and the SEC will spend a lot of time shutting them down,” Hanks says. “This is either going to be a fantastic way to encourage more collaborative, democratic capitalism, or—if we can’t make it work honestly—it turns into time shares” and gets shunned.
The crowdfunding community has been organizing to institute standards and policies to protect itself.>>> READ MORE at: