If you have heard or seen (or invested in) a pitch for your money to help launch a project, you have been solicited by what is known as “crowdfunding.” Crowdfunding has grown as a method to raise start-up or seed money for a business from a wide number of investors at relatively small investment amounts from each investor.
This type of fundraising has become increasingly common as of late, and the Securities and Exchange Commission (SEC) has voiced concerns about proper regulation of this new investment platform. Last week, the SEC and FINRA moved one step closer to full launch, inviting online funding portals to apply for registration.
The rules will not take place until May 16, but crowdfunding portals can get the ball rolling by becoming FINRA members and registering with the SEC. Proponents of the new system argue that crowdfunding portals have strong incentives to monitor their programs for fraud and to protect the legitimacy of the system.
Before a portal can be cleared to operate, it will have to submit information about its company and business plans to both the SEC and FINRA. The SEC currently requires that funding portals become members of a national securities association registered under federal law – and only FINRA meets this qualification.
The application process is similar to the procedure for broker-dealers, although portals not seeking to operate as full-fledged broker-dealers will face fewer requirements.
Call a Los Angeles Securities Fraud Attorney Today
Crowdfunding is in its early stages but will continue to expand. If you experience investment losses through a crowdfunding portal, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities fraud attorney for a consultation today.