Previously, entrepreneurs had a limit of $1.07 million for regulation crowdfunding. Regulation crowdfunding provides entrepreneurs with an exemption from the SEC’s registration requirements for securities-based crowdfunding, according to the SEC website.
This means that entrepreneurs can raise up to a certain amount of their securities without having to register the transaction with the SEC. Before, that amount was $1.07, and now it’s $5 million.
The amendment passed by the SEC comes after there’s been more conversation around expanding opportunities to invest in startups. Last month, the SEC changed another rule, expanding its definition of an accredited investor.
Accredited investors previously had to meet certain income and wealth requirements. Now, the SEC has expanded that pool to other individuals who may not meet the income and wealth requirements, but have other proof of “financial sophistication,” according to Newsday.