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Crowdfunding: Capital Raising Boon or Investor Fleecing Bust?

Louis M. Thompson | January 14, 2014

The Securities and Exchange Commission recently proposed a ten-fold increase in the amount new businesses can raise before having to register securities with the agency. Will the new rules become a panacea for job creation or, as some suggest, a license to commit fraud and manipulate unsuspecting investors?

When Congress first sketched out plans to increase the limits on the registration exemptions for small-company capital raising in the JOBS Act, I expressed skepticism that there would be enough disclosure requirements to adequately protect investors from fraud. But when the SEC proposed rules in December to carry out the plan—creating the Regulation A+ exemption—it included enough investor protections to mostly allay my concerns. 

Under the old rules (still available in the Regulation A exemption) eligible companies were limited to raising $5...

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