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In the United States, Regulation Crowdfunding (often referred to as “Reg CF”) enables eligible companies to offer and sell securities through crowdfunding.

The rules:

  • require all Reg CF transaction to take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal;
  • permit a company to raise a maximum aggregate amount of $1.07 million annually;
  • limit the amount individuals can invest annually across all crowdfunding offerings; and 
  • require disclosure of substantive narrative business and financial information about the company in filings with the SEC and to investors and the intermediary facilitating the offering.

Securities purchased in Reg CF offerings generally cannot be resold for one year, unless the securities are transferred:

  • back to the company;
  • to an “accredited investor”;
  • as part of an offering registered with the SEC; or
  • to a family member of the purchaser or in other similar and limited circumstances.

Individual investors are limited in the amounts they are allowed to invest in all Reg CF offerings annually:

  • If either of an investor’s annual income or net worth is less than $107,000, then the investor’s investment limit is the greater of:
    • $2,200 or
    • 5 percent of the lesser of the investor’s annual income or net worth.
  • If both annual income and net worth are equal to or more than $107,000, then the investor’s limit is 10 percent of the lesser of their annual income or net worth.

During the 12-month period, the aggregate amount of securities sold to an investor through all Regulation Crowdfunding offerings may not exceed $107,000, regardless of the investor’s annual income or net worth. This chart from the SEC illustrates a few examples of the investment limits:

Investor
Annual Income
Investor
Net Worth
Calculation
Investment Limit[4]
$30,000
$105,000
Greater of $2,200 or 5% of $30,000 ($1,500)
$2,200
$150,000
$80,000
Greater of $2,200 or 5% of $80,000 ($4,000)
$4,000
$150,000
$107,000
10% of $107,000 ($10,700)
$10,700
$200,000
$900,000
10% of $200,000 ($20,000)
$20,000
$1,200,000
$2,000,000
10% of $1,200,000 ($120,000), subject to $107,000 cap
$107,000

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There’s lots more to the rules than all of this and they are likely to change in the coming months. We encourage you to read about Reg CF including the proposed changes to the rules to learn more.

You may also be interested in reading our high-level overview on Regulation A (aka “Reg A” or “Reg A+) and Intrastate Securities offerings.

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What is Regulation Crowdfunding (Reg CF)?

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