Mass. SOS announces ‘crowdfunding exemption’

BOSTON – Massachusetts secretary of state earlier this month announced a policy change to allow a “crowdfunding exemption” for investment offerings within the Bay State.
Secretary William F. Galvin is allowing the regulation – effective immediately – which permits Massachusetts companies to raise capital from Massachusetts investors, covering intra-state offerings over the internet.
“The exemption will enable Massachusetts startups and entrepreneurs to more easily use the internet to raise capital which I hope will, in turn, give a boost to the Commonwealth’s economy and foster job growth here,” said Galvin. “And a carefully crafted regulation such as this offers protection for investors and companies using this new form of generating capital.”
The exemption can be used for a range of different businesses, including corporations, LLCs and LLPs. It will not be available for other types of businesses, including those involved with oil and gas exploration or production, mining or other extractive industries, according to a press release.
Entrepreneurs can raise up to $1 million in a one-year period, or up to $2 million if the company has audited financial statements, according to the release.
Investors are limited to a purchase of securities in the amount of $2,000, or 5 percent of their income, whichever is greater. Those with incomes or net worth of more than $100,000 are limited to $100,000 or 10 percent of their income or net worth, whichever is greater, according to the release.
The exemption doesn’t cover certain types of insurers, including blind pool and blank check offerings, investment companies, hedge funds, or commodity pools. Insurers must meet federal rules on crowdfunding in accordance to the Securities Act and the Securities and Exchange Commission Rule 147, according to the release.