On May 16, 2016, Equity Crowdfunding for non-accredited investors will become legal. This was, of course, a part of the JOBS act that was passed in April of 2012, but the equity crowdfunding provision has been on hold and in debate for over three years. The Securities and Exchange Commission published extra regulations that finally got the provision passed.

This equity crowdfunding provision, also known as Title III, was in debate for such a long time because of the fear that it could invite more fraud. Title III, in its simplest form, is a provision that allows non-accredited investors into equity crowdfunding. Basically, the average Joe will now have the ability to invest in a young company. Title III was initially thought of as a way to keep up the incredible equity crowdfunding growth rate that has been seen for the past five years and now, with its implementation, this growth rate may even get larger.

Of course, there will be regulations. Title III is being implemented through broker-dealers and internet portals specifically designed to host public offerings. This means that anyone can invest in a company, but there is less of a chance of fraud and illegal activity. Additionally, there are limits on the amount of money that can be raised through one investor, which depends on the income of each individual investor. There are also limits on the amount of money that a company can raise through these portals within a 12 month period.

The companies raising money are required to submit detailed answers to investment questions before accepting any offers. This includes, among other items, the risk of investing in their company. There are many other requirements the startups must meet, and questions they must answer, before entering these secure channels to accept investments. However, the payoff in the end will be much greater, as now there is a wider population from which to accept investments.

Title III is a great way for new companies to find investors. It allows companies to advertise their offerings to the public, which was before illegal, and to freely discuss business with investors through secure portals. Although there is dissent, I believe that the implementation of Title III will do great things to the startup investment space. Although the significant regulations imposed on companies within Title III could be a barrier to progress, this provision will surely help more startups become successful.

For more information on the passing of Title III, read this article on Mondaq.