The Crowdfunding Effect

Abstract

The U.S. Securities & Exchange Commission (SEC) recently moved to finalize its proposed crowdfunding rule that would enable the use of small amounts of capital from a large number of individuals to finance a new business venture over the Internet. CFOs responsible for raising capital for their companies will cheer this new source of funding, but it also brings with it some challenges. The SEC’s action establishes a framework through which businesses and investors can invest in a company’s stock without being subject to some of the traditional rules governing publicly traded securities. It’s an historic change, but permanently allowing crowdfunding will have broad implications across the U.S. capital markets and their participants, particularly CFOs.