HARRISBURG, Pa., May 16, 2016 /PRNewswire-USNewswire/ -- Beginning today, Pennsylvania investors and businesses are able to buy and sell shares of companies through crowdfunding according to SEC rules. These create "equity crowdfunding," a non-traditional way for small businesses and start-up companies to raise capital over the Internet by offering equity, or ownership interest, in the company to investors.
The Department of Banking and Securities is reminding Pennsylvania investors and businesses interested in buying and selling shares in companies through crowdfunding that these offerings must be conducted through a broker-dealer or a funding portal that is registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Agency (FINRA).
"Until now, crowdfunding in Pennsylvania could be used only to raise contributions for causes, projects, services, or products," said Secretary of Banking and Securities Robin L. Wiessmann. "Like all forms of investing, equity crowdfunding involves risk. As with any investment, consumers should 'investigate before you invest' and businesses must be appropriately registered or granted exemptions."
Wiessmann emphasized that businesses cannot advertise or make equity crowdfunding offers in Pennsylvania without federal exemption from Pennsylvania law. She also noted not all companies whose offerings will be found on crowdfunding websites will succeed, not all will have sound business plans, and some may not even be legitimate operations.
"It is important for investors to do your homework and/or seek trusted professional advice before investing money in an equity crowdfunding opportunity," she said. "It is important for individual investors to review all of the available information in order to find investments that are right for their situations, goals and levels of risk tolerance. It is also important for businesses to ensure that their securities offering is either properly registered or exempted from registration."
Wiessmann urged investors to visit the FINRA website and the SEC's online EDGAR database for more information on crowdfunding portals and to ensure that the portals and broker-dealers offering shares through crowdfunding are properly registered:
- FINRA: www.finra.org/investors/alerts/crowdfunding-and-jobs-act-what-investors-should-know
- FINRA: www.finra.org/industry/about-funding-portals
- SEC EDGAR: www.sec.gov/edgar/searchedgar/webusers.htm
Members of the public can contact the Department of Banking and Securities consumer hotline (1-800-PA-BANKS) to file a complaint or ask questions about financial products, transactions, or companies. Consumers and businesses can learn more at www.dobs.pa.gov, and are also invited to connect to the department's outreach efforts by following us on Facebook and Twitter or subscribing to the department's newsletter.
Media contact: Ed Novak, 717-783-4721
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SOURCE Pennsylvania Department of Banking and Securities