Small businesses can raise money on the internet

The law has been signed since April 2012 by President Obama as part of the JOBS Act. The provision makes it legal in The United States for small businesses to sell stock and other securities over the Internet directly to the public, otherwise known as "crowdfunding". As President Obama stated: "For the first time ordinary Americans will be ale to go online and invest in entrepreneurs that they believe in."

Before this law existed, all companies were required to register with the S.E.C. to be allowed to sell securities to the public, which kept small businesses out of the loop because of the costs involved in the hiring the services of lawyers accountants and investment bankers.

The law exempts issuers from the registration process when offering and selling up to $1 million in securities during a year's period. The transaction must be conducted through a broker or funding portal that complies with specific requirements of this law. It also needs to satisfy other conditions in the JOBS act, some of which require rulemaking by the S.E.C. This means that until the S.E.C.adopt rules to implement the new exemption "any offers or sales of securities purporting to rely on the crowdfunding exemption would be unlawful under the federal securities laws."

The S.E.C. states that "the JOBS Act directs the SEC to adopt rules to implement Title III within 270 days of enactment of the Act." That period ended on December 31, 2012.  So as of today the S.E.C. is 17 days behind the deadline. Meanwhile the existing crowdfunding websites are limiting their operations to requesting donations or offering rewards.