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Updated Investor Bulletin: Regulation Crowdfunding for Investors

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to educate investors about securities-based crowdfunding.

Crowdfunding generally refers to a financing method in which money is raised through soliciting relatively small individual investments or contributions from a large number of people.  Companies can use Regulation Crowdfunding to offer and sell securities to the investing public giving the public the opportunity to participate in the early capital raising activities of start-up and early-stage companies and businesses. 

Can I make a Regulation Crowdfunding investment?

Anyone can invest in a Regulation Crowdfunding offering.  Because of the risks involved with this type of investing, however, you may be limited in how much you can invest during any 12-month period in these transactions.  If you are an accredited investor, then there are no limits on how much you can invest.   

Accredited investor. An individual will be considered an accredited investor if he or she:
  • earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years, and reasonably expects the same for the current year,
  • has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence and any loans secured by the residence (up to the value of the residence)), OR
  • holds certain professional certifications, designations or credentials in good standing, including a Series 7, 65 or 82 license.

A spousal equivalent means a cohabitant occupying a relationship equivalent to that of a spouse

If you are a non-accredited investor, then the limitation on how much you can invest depends on your net worth and annual income.

If either your annual income or your net worth is less than $124,000, then during any 12-month period, you can invest up to the greater of either $2,500 or 5% of the greater of your annual income or net worth. 

If both your annual income and your net worth are equal to or more than $124,000, then during any 12-month period, you can invest up to 10% of annual income or net worth, whichever is greater, but not to exceed $124,000. 

The following table provides a few examples:

Annual Income

Net Worth


12-month Limit



greater of $2,500 or 5% of $40,000 ($2,000)




greater of $2,500 or 5% of $150,000 ($7,500)




10% of $150,000 ($15,000)




10% of $900,000 ($90,000)


Joint calculation.  You can calculate your annual income or net worth by jointly including your spouse’s income or assets.  It is not necessary that property be held jointly.  However, if you do calculate your income or assets jointly with your spouse, each of your crowdfunding investments together cannot exceed the limit that would apply to an individual investor at that annual income or net worth level.

How do I calculate my net worth?

Calculating net worth involves adding up all your assets and subtracting all your liabilities.  The resulting sum is your net worth. 

For purposes of Regulation Crowdfunding, the value of your primary residence is not included in your net worth calculation.  In addition, any mortgage or other loan on your primary residence does not count as a liability up to the fair market value of the residence.  If the loan is for more than the fair market value of your primary residence (i.e., if your mortgage is underwater), then the loan amount that is over the fair market value counts as a liability under the net worth test.

Further, any increase in the loan amount (other than for the purchase of the primary residence) in the 60 days prior to your purchase of the securities (even if the loan amount does not exceed the value of the primary residence) will count as a liability as well.  The reason for this is to prevent net worth from being artificially inflated through converting home equity into cash or other assets.

While your individual circumstances will vary, the following table sets forth examples of calculations under the net worth test in order to determine crowdfunding investment limits:


Jane Doe

John Smith

James Lee

Primary residence

(not included except for related liabilities below):




  Home value........................

            $ 300,000

            $ 300,000

            $ 300,000





  Home equity line:




      more than 60 days old....




      less than 60 days old.......




Included assets:




  Bank accounts....................

            $ 20,000

            $ 20,000

            $ 20,000

  401(k)/IRA accounts............




  Other investments..............








    Total included assets.........

            $ 190,000



Included liabilities:




  Student and car loans..........

            $ 100,000

            $ 100,000

            $ 100,000

  Other liabilities...................




  Portion of mortgage







  Home equity line

     (less than 60 days old)......







    Total included liabilities....

            $ 120,000

            $ 130,000

            $ 150,000

Net worth............................

            $ 70,000

            $ 60,000

            $ 40,000





How do I make a Regulation Crowdfunding investment?

You can only invest in a Regulation Crowdfunding offering through the online platform, such as a website or a mobile app, of a broker-dealer or a funding portal.  Companies may not offer Regulation Crowdfunding investments to you directly—they must use a broker-dealer or funding portal.    

The broker-dealer or funding portal—a crowdfunding intermediary—must be registered with the SEC and be a member of the Financial Industry Regulatory Authority (FINRA).  You can obtain information about a broker by visiting FINRA’s BrokerCheck or calling FINRA’s toll-free BrokerCheck hotline at (800) 289-9999.  You can obtain information about a funding portal by visiting the SEC’s EDGAR website.

Keep in mind that you will have to open an account with the crowdfunding intermediary—the broker-dealer or funding portal—in order to make an investment and all written communications relating to your crowdfunding investment will be electronic.

What should I keep in mind?

Regulation Crowdfunding offers investors an opportunity to participate in an early-stage venture.  However, you should be aware that early-stage investments may involve very high risks and you should research thoroughly any offering before making an investment decision.  You should read and fully understand the information about the company and the risks that are disclosed to you before making any investment. 

The following are some risks to consider before making a Regulation Crowdfunding investment:

  • Speculative.  Investments in startups and early-stage ventures are speculative and these enterprises often fail.  Unlike an investment in a mature business where there is a track record of revenue and income, the success of a startup or early-stage venture often relies on the development of a new product or service that may or may not find a market.  You should be able to afford and be prepared to lose your entire investment.
  • Illiquidity.  You will be limited in your ability to resell your investment for the first year and may need to hold your investment for an indefinite period of time.  Unlike investing in companies listed on a stock exchange where you can quickly and easily trade securities on a market, you may have to locate an interested buyer when you do seek to resell your investment.  
  • Cancellation restrictions.  Once you make an investment commitment for a Regulation Crowdfunding offering, you will be committed to make that investment (unless you cancel your commitment within a specified period of time).  As detailed in the box below for Changing your mind, the ability to cancel your commitment is limited.   
  • Valuation and capitalization.  Your Regulation Crowdfunding investment may purchase an equity stake in a startup.  Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult and you may risk overpaying for the equity stake you receive.  In addition, there may be additional classes of equity with rights that are superior to the class of equity being sold through Regulation Crowdfunding offering.
  • Limited disclosure.  The company must disclose information about the company, its business plan, the offering, and its anticipated use of proceeds, among other things.  An early-stage company may be able to provide only limited information about its business plan and operations because it does not have fully developed operations or a long history to provide more disclosure.  The company is also only obligated to file information annually regarding its business, including financial statements.  A publicly listed company, in contrast, is required to file annual and quarterly reports and promptly disclose certain events—continuing disclosure that you can use to evaluate the status of your investment.  In contrast, you may have only limited continuing disclosure about your Regulation Crowdfunding investment. 
  • Investment in personnel.  An early-stage investment is also an investment in the entrepreneur or management of the company.  Being able to execute on the business plan is often an important factor in whether the business is viable and successful.  You should also be aware that a portion of your investment may fund the compensation of the company’s employees, including its management.  You should carefully review any disclosure regarding the company’s use of proceeds.
  • Possibility of fraud.  In light of the relative ease with which early-stage companies can raise funds through crowdfunding, it may be the case that certain opportunities turn out to be money-losing fraudulent schemes.  As with other investments, there is no guarantee that Regulation Crowdfunding investments will be immune from fraud.
  • Lack of professional guidance.  Many successful companies partially attribute their early success to the guidance of professional early-stage investors (e.g., angel investors and venture capital firms).  These investors often negotiate for seats on the company’s board of directors and play an important role through their resources, contacts and experience in assisting early-stage companies in executing on their business plans.  An early-stage company primarily financed through Regulation Crowdfunding may not have the benefit of such professional investors.

How do I get informed?

Broker-dealers and funding portals that operate Regulation Crowdfunding platforms are required to offer educational materials to help investors understand this type of investing.  These materials further detail the risks involved when making a Regulation Crowdfunding investment.  You should take advantage of this resource to educate yourself and understand the risks of making Regulation Crowdfunding investments.  Remember, this is your money that you are putting at risk, and you should only invest after careful consideration of the risks. 

Review and acknowledgement.  Before you can make a Regulation Crowdfunding investment, the broker-dealer or funding portal operating the Regulation Crowdfunding platform you are using must ensure that you review educational materials about this type of investing.  In addition, you will have to positively affirm that you understand that you can lose all of your investment and that you can bear such a loss.  You will also have to demonstrate that you understand the risks of investing in a Regulation Crowdfunding offering.

As mentioned, the companies that you invest in are required to disclose a limited amount of information to you.  This information includes general information about the company, its officers and directors, a description of the business, the planned use for the money raised from the offering, often called the use of proceeds, the target offering amount, the deadline for the offering, related-party transactions, risks specific to the company or its business, and financial information about the company.  You should use this information to determine whether a particular investment is appropriate for you.

Tiered financial disclosure. The minimum level of financial disclosure required by the company depends on the amount of money being raised or raised by the company in the prior 12 months:
  • $124,000 or less – financial statements and specific line items from income tax returns, both of which are certified by the principal executive officer of the company unless financial statements reviewed or audited by an independent public accountant and the accountant’s review or audit report, as the case may be, are otherwise available.
  • $124,000.01 to $618,000 – financial statements reviewed by an independent public accountant and the accountant’s review report unless financial statements audited by an independent public accountant and the accountant’s audit report are otherwise available.
  • $618,000.01 to $1.235 millionif first time crowdfunding and audited financial statements are not available, then financial statements reviewed by an independent public accountant and the accountant’s review report, otherwise financial statements audited by an independent public accountant and the accountant’s audit report.
  • More than $1.235 million (up to the maximum aggregate of $5 million) – financial statements audited by an independent public accountant and the accountant’s audit report.

An audit provides a level of scrutiny by the accountant that is higher than a review.

The sharing of views by members of the crowd is considered by some to be an integral part of Regulation Crowdfunding.  Broker-dealers and funding portals, through their Regulation Crowdfunding platforms, are required to have communication channels transparent to the public—for example, on an online forum—relating to each particular investment opportunity.  In these channels, the crowd of investors can weigh in on the pros and cons of an opportunity and be able to ask the company questions.  All persons representing the company must identify themselves.  It may be worthwhile to monitor these communication channels before and after you make your commitment to invest.

Changing your mind.  You have up to 48 hours prior to the end of the offer period to change your mind and cancel your investment commitment for any reason.  Once the offering period is within 48 hours of ending, you will not be able to cancel for any reason even if you make your commitment during this period.  However, if the company makes a material change to the offering terms or other information disclosed to you, you will be given five business days to reconfirm your investment commitment.

What’s different about being a Regulation Crowdfunding investor?

Being a Regulation Crowdfunding investor is different than being a shareholder in a publicly listed company.  For one thing, you cannot sell your shares at any time as you would be able to do if you held shares in a publicly listed company.  In fact, you are restricted from reselling your shares for the first year, unless the shares are transferred:

  • to the company that issued the securities;
  • to an accredited investor;
  • to a family member;
  • in connection with your death or divorce or other similar circumstance;
  • to a trust controlled by you or a trust created for the benefit of a family member; or
  • as part of an offering registered with the SEC.
Family member. For purposes of the above, a family member is defined as a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships.

Another difference from being a shareholder of a publicly listed company is the amount of information you’ll receive about your investment.  Publicly listed companies generally are required to disclose information about their performances at least on a quarterly and annual basis and on a regular basis about material events that affect the company.  In contrast, Regulation Crowdfunding companies are only required to disclose annually their results of operations and financial statements.   

Additional Information

To learn about SAFEs, a type of security being used in Regulation Crowdfunding, see our Investor Bulletin.

For a list of funding portals registered with FINRA to act as Regulation Crowdfunding intermediaries, visit here.

For a list of broker-dealer firms registered with FINRA, visit here.

For our Investment Adviser Public Disclosure (IAPD) website, visit

For FINRA’s BrokerCheck, visit

For information on how to search for company documents in the SEC’s EDGAR database, see Using EDGAR to Research Investments.

For more information about accredited investors, see our Investor Bulletin.

To learn more about Regulation Crowdfunding, see this website.

For additional investor educational information, see the SEC’s website for individual investors,    

This bulletin represents the views of the staff of the Office of Investor Education and Advocacy.  It is not a rule, regulation, or statement of the Securities and Exchange Commission (the “Commission”).  The Commission has neither approved nor disapproved its content.  This bulletin, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.
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