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The JOBS Act Isn’t All ‘Crowdfunding’

By Chris Brummer & Daniel Gorfine On September 23, the SEC officially implemented Title II of the JOBS Act by lifting a decades-old ban on the mass marketing of private securities offerings – meaning those securities not formally registered with the SEC. This has triggered enormous excitement in startup and small business communities as entrepreneurs consider ways to raise funds through newly available capital-raising tools. But even with the increased media coverage and interest, there is still a good deal of confusion about what portion of the law went ‘live,’ and how this portion relates to other provisions in the legislation. Much of the confusion can be tied to the habit of conflating different aspects of the JOBS Act and calling it all “crowdfunding.” The fact is that the JOBS Act tackles access to capital in a number of distinct ways, each with its own set of opportunities, risks, and questions. And while the law includes aspects related to use of the Internet and social media – elements that most people associate with crowdfunding – large sections are also focused on creating new opportunities for wealthier investors and private capital markets. Understanding these distinctions is critical for entrepreneurs and investors […]

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