Following President Obama's signing the Jumpstart Our Business Startups Act ("JOBS Act") into law on April 5, 2012, Missouri has taken the lead among the states to guide small businesses on the use of the crowdfunding exemption, a crucial part of the JOBS Act. The crowdfunding exemption as applied under the new Act allows small businesses and start up companies to raise capital by making securities offerings to the public on the Internet without having to register the offerings at the federal or state level. The following caveats, however, are provided by the Missouri Securities Division:
1. Enterpreneurs and issuers may not claim the crowdfunding exemption until the SEC adopts rules regulating use of the exemption. As rules may not be in place until 2013, entrepreneurs and issuers making interim Internet offerings to the public risk liability for fraud, as well as subjecting themselves to state administrative enforcement actions.
2. Even after SEC crowdfunding rules are adopted:
a. the amount of securities an investor may purchase from an issuer is limited to the amount of the investor's annual income or net worth, e.g, an investor with less than $100,000 in annual income or net worth may only purchase securities in an amount not exceeding either $2,000 or 5% of the investor's annual income or net worth, whichever amount is greater.
b. issuers must offer their securities through an SEC-registered broker or funding portal.
c. while the crowdfunding exemption exempts issuers from federal and state registration requirements, the broker or funding portal must comply with disclosure requirements, by making certain disclosures to the SEC and investors.