US SEC releases new limits on crowdfunding investment

crowdfunding

The US Securities and Exchange Commission has just released a new inflation-adjusted increase in the investment limits for securities-based crowdfunding.

Crowdfunding is a financing method in which money is raised through soliciting relatively small individual investments or contributions from a large number of people.

The risk of investing in early stages of a venture exposes investors to risks that may not be as prevalent with investments in publicly listed companies.

The SEC said the limit is important because for example, investing in a crowdfunding opportunity may come with increased speculative risk in connection with whether the venture succeeds at all as well as the increased illiquidity associated with investing in a company not listed on a stock exchange.

New limits are now in place for US citizens based on their annual income. For example, if a person’s annual income or net worth is less than $107,000, then during any 12-month period, you can invest up to the greater of either $2,200 or 5% of the lesser of your annual income or net worth.

See below the full bfreakdown and limits:

Annual Income

Net Worth

Calculation

12-month Limit

$30,000

$105,000

greater of $2,200 or 5% of $30,000 ($1,500)

$2,200

$150,000

$80,000

greater of $2,200 or 5% of $80,000 ($4,000)

$4,000

$150,000

$107,000

10% of $107,000 ($10,700)

$10,700

$200,000

$900,000

10% of $200,000 ($20,000)

$20,000

$1.2 million

$2 million

10% of $1.2 million ($120,000), subject to cap

$107,000