HARRISBURG, Pa., Aug. 3, 2016 /PRNewswire-USNewswire/ -- The PA Department of Banking and Securities has issued guidance for businesses on equity crowdfunding, a new way for small businesses and start-ups to raise money from individual investors through the sale of ownership shares over the Internet.
"Crowdfunding is an innovative approach designed to help start-ups get off the ground and smaller companies expand by tapping investors who are not always recognized by traditional capital markets," Secretary of Banking and Securities Wiessmann said. "Through new U.S. Securities and Exchange Commission rules, the regulatory requirements for this type of investing transaction have been streamlined. However, businesses must still abide by legal disclosure requirements, including disclosure of material facts and risks to investors."
The department's guidance discusses issues such as disclosure and liability, working with funding portals, the advisability of seeking legal counsel, and even "6 things to know about how to crowdfund," which include:
- Through crowdfunding, individuals will be able to invest in entrepreneurial start-ups or small businesses through a broker-dealer or a "funding portal," a type of website.
- Funding portals facilitate investments, including payments from investors to businesses.
- Some portals may list a variety of investment opportunities on one website, allowing investors to select one or more projects.
- Funding portals cannot provide investment advice and must be registered with the SEC.
- Companies using crowdfunding may not directly solicit individual investors.
- Information about funding portals at: www.finra.org/about/funding-portals-we-regulate.
The department's guidance can be found online at: http://bit.ly/2ammj1r [PDF]
The department's "Entrepreneur Education" website also contains information on how small businesses and start-ups can raise capital through more traditional methods: www.dobs.pa.gov/Businesses/entrepreneur%20Education/Pages/default.aspx
Owners and legal representatives of small businesses and start-ups can contact the Department of Banking and Securities at 1-800-PA-BANKS or 1-800-600-0007 to get answers to their questions about securities offerings and crowdfunding. Members of the public are also invited to connect to the department through Facebook and Twitter, or subscribing to the department's newsletter.
MEDIA CONTACT: Ed Novak, 717-783-4721
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/pennsylvania-secretary-wiessmann-advises-businesses-and-start-ups-to-be-well-informed-about-equity-crowdfunding-300307800.html
SOURCE Pennsylvania Department of Banking and Securities