Secretary of State Connie Lawson today announced rules are being put into place to open the doors for Internet crowdfunding in Indiana.
The rules allow Indiana private companies to raise up to $2 million in capital. Individuals can invest up to $5,000.
Many companies are already using crowdfunding to attract investors, but under current federal laws and regulations, only accredited investors–people who make at least $200,000 a year or have a net worth of more than $1 million–are typically allowed to invest.
The Securities and Exchange Commission is considering rules that would allow unaccredited investors the same opportunity, but instead of waiting for those rules, a few states, like Indiana, are creating their own laws to allow unaccredited investors to invest through crowdfunding–as long as the investment is within the state’s borders.
Under Indiana’s law, companies that want to crowdfund must file each investment offer with the secretary of state’s office, and the websites that facilitate the deals must also register with the secretary of state.
“We will spend every day trying to root out fraud but we won’t stand in the way of Hoosiers deciding to invest in homegrown companies,” Lawson says.
Lawson says, unlike popular crowdfunding site Kickstarter, the Indiana system will allow individuals to buy stakes in a company, rather than just donate money. Still, she says investors need to do their homework.
“Just like any other security, there are risks when you invest and I’m calling on our private sector leaders to help us police this new market for the bad actors,” she says.
Lawson says standard disclosure rules apply to companies using crowdfunding, meaning they cannot withhold important information about their business from potential investors or promise something they can’t deliver.