The Securities Board of the State of Texas voted 4-0 to approve new intrastate equity-based crowdfunding rules. The goal of intrastate crowdfunding is to provide more capital for early stage companies at a reduced cost so now Texas companies will be able to raise funding from the average investor. The rules become effective late November.
The key highlights are:
- Texas’ rules allow a company to raise up to $1 million a year through an approved Texas crowdfunding portal.
- Any resident of Texas can invest up to $5,000 per company. But only accredited investors, high net worth individuals who have assets of more than $1 million excluding their home and net income annually of $200,000, may invest any amount.
- The Texas State Securities Board must approve the Texas crowdfunding portals.
- Texas Crowdfunding portals need only fill out a form and pay a standard filing fee which basically provides a basic background check. The portal needs to track investor/issuer comments and all communications must take place on the portal. Portals do not need to sit for exams and must maintain records of transactions for five years.
The approved rules makes Texas the 13th state, and the largest to date, to adopt its own equity-based crowdfunding rules in advance of the U.S. Securities and Exchange Commission’s expected national rules. The JOBS Act of 2012 authorized the SEC to create new crowdfunding rules for the country, but they have been delayed by more than a year. So several states have taken matters into their own hands and adopted their own.