The SEC Ruling
After more than three years of speculation by industry insiders, the SEC finally announced on Oct. 30th its decision to open equity crowdfunding to non-accredited investors. This is a notable moment for the investment industry as it is the first time that all investors will be able to invest in private transactions.
Since the early 1930s, only accredited investors, which includes individuals earning $200,000 or more annually or holding at least $1 million in assets, minus their private homes, to invest in private investments. While Title III of the JOBS Act erases any income requirements, there are limitations to the amount non-accredited individuals may invest: non-accredited investors may only invest between 5% and 10% of their annual income or net worth depending on how much they earn. Additionally, companies can raise a maximum of just $1 million through crowdfunding from this category of investors. The ruling takes effect in late January after a 90-day comment period.
Q&A with CEO Jilliene Helman
How would you describe the impact of this SEC ruling, which took 3.5 years for a decision?
It’s a very historic moment for the investment industry as it’s the first time since 1933 that such a meaningful change has been made to securities regulation. For the first time, all investors, no matter the size of their income or net worth, will be able to invest in private transactions.
At $34B a year for all types of crowdfunding, what does this ruling mean specifically to the real estate crowdfunding industry?
Even more capital will start to flow into real estate crowdfunding from non-accredited investors and it will be easier for smaller real estate transactions to get financed due to the $1 million regulatory cap. With that being said, because you cannot finance more than $1 million per year per issuer, this will limit the number of dollars of capital raised.
Now that the market is potentially open to non-accredited investors, and everyday citizens will have access to investing, what does that mean for RealtyMogul.com?
While the decision has the potential to change our industry by allowing non-accredited investors to invest in private transactions for the first time, it does not fundamentally change the premise behind RealtyMogul.com. Our mission has always been to simplify real estate investing and make it easier for real estate companies to access capital and investors to invest in real estate online, similar to how they have invested in stocks and bonds online for decades. This decision allows us to expand the scope of investors who have access to real estate transactions, however we are still addressing the $1 million annual limitation per issuer and the impact that will have on real estate companies looking to simplify their capital needs. We are still exclusively focused on accredited investors today, but we are also actively addressing our strategy for non-accredited investors.
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