Regulation Crowdfunding (Reg CF)
An SEC exemption that allows startups and small businesses to raise up to $5 million per year from the general public through SEC-registered online funding portals.
What is Reg CF?
Regulation Crowdfunding (Reg CF), established under the JOBS Act of 2012 and effective from 2016, allows eligible companies to raise capital from both accredited and non-accredited investors through SEC-registered crowdfunding portals and broker-dealers. The annual offering limit is $5 million (raised from $1.07 million in 2021). Investor investment limits depend on their income and net worth: investors whose annual income or net worth is below $124,000 may invest the greater of $2,500 or 5% of the lesser of their income or net worth per 12-month period; investors with higher income and net worth may invest up to 10%. Issuers must file Form C with the SEC and disclose financials, use of proceeds, and risk factors. Securities purchased under Reg CF are generally restricted for one year.
Example
A craft brewery wants to raise $500,000 to expand production. Unable to meet the requirements for a traditional bank loan or VC funding, it lists on a Reg CF portal. Over 60 days, 1,200 customers and community members invest $25–$2,500 each, reaching the target. The brewery files Form C with the SEC and issues equity shares to its new investor-customers.
Source: SEC — Regulation Crowdfunding