(Reuters) – Some entrepreneurs are becoming so anxious to sell securities in their companies through crowdfunding sites that they are courting investors before federal rules allowing the process are in place, a state securities regulator said on Wednesday.
Reports about small business owners who are trying to solicit investors too early were among the concerns that prompted the North American Securities Administrators Association (NASAA), an organization of state securities regulators, to issue an advisory about crowdfunding for small businesses on Wednesday, said Heath Abshure, NASAA’s president-elect, in an interview.
Crowdfunding is a capital-raising strategy in which investors buy small stakes in ventures through various websites. The Jumpstart Our Business Startups Act, or JOBS Act, which was signed into law in April, allows small businesses to sell securities through the sites, subject to certain procedures. The sites were initially used as a way to help creative people fund projects such as films and inventions.
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