Until last week only “accredited investors”—those whose net worth exceeds $1 million, excluding their primary residence, or who earn more than $200,000 a year—are allowed to participate in crowdfunding. The new ruling will let anyone invest as much as $2,000 or 5% of annual income or net worth, whichever is greater.
The SEC’s approval Friday of the Title III portion of the act opens the way for small companies to raise money from a wide range of people who aren’t accredited investors in return for equity. The new rule would allow anyone to invest as much as $2,000 or 5% of their annual income or net worth, whichever is greater, in small-scale fundraising projects of as much as $1 million in any 12-month period. Investors whose income and net worth are both more than $100,000 can invest as much as 10% of the lesser of their income or net worth.