International Financial Corporation Securities Regulatory Commission: All You Need to Know about Crowdfunding from FINRA
Buyingsecurities from early-stage companies can now be easily done beginning May 16,2016 using the crowdfunding system. For investors who desire to choose thismethod for the first time, they must evaluate the risks involved in investingin these small companies, advises the Financial Industry RegulatoryAuthority (FINRA).
Accordingto FINRA’s Senior VP Gerri Walsh, “Crowdfunding has produced great interestsamong investors; hence, the temptation to ride the wave on upcoming startupscan be very strong. Nevertheless, the prospects of getting involved in newopportunities should impel investors to stop and look for the right answers tovital questions.” He added that “unregistered and emerging securities carrysignificant risk, and investors must be wary of such bright, new object andcome up with educated and logical investment decisions”.
Basedon the new provisions instituted on May 16, 2016, the general public can nowinvest in capital funding for start-up companies through crowdfunding. Asdefined, crowdfunding allows small businesses to utilize the Internet to raisefunds for their capital through limited investments coming from a sizeablenumber of investors. FINRA’s announcement lays down the process by which equitycrowdfunding works, together with the income and net-worth qualificationspotential investors have to satisfy and the data provided by broker-dealers,issuers and funding portals.
FINRA’Sannouncement likewise provides help to investors for them to assess whethercrowdfunding is appropriate for them. Here are some helpful tips:
1.Determine whether you can take the risk as well as the possible loss you mayincur. There is no argument that startups and early-stage businesses can fail.Be prepared then to lose every dollar of your investment, when it does happen.Likewise, remember that your capability to resell your investment will be quitelimited during the first year. Hence, you may have to let your investment stay thecourse for quite a while until new opportunities present themselves.
2.Keep updated and well aware of the financial and educational information, aswell as other reports furnished by the issuer and crowdfunding brokers. Do nothesitate to seek answers for your immediate concerns regarding the investment,such as possible loss of your investment. Seek the opinions of unbiasedprofessionals and other investors, for instance, an accountant who comprehendsfinancial statements and who may not have any personal stake on the investment.
3.Consider the possibility of fraud. Safeguard your interests by studying howscammers can dupe you; so you can avoid them. Get in touch with investmentprofessionals through BrokerCheck, and visit FINRA’s Funding Portal website onwww.finra.org which went online on May 16, 2016.
4.For the most recent Investor Alerts and other vital investor information,subscribe to Investor News.
TheInternational Financial Securities & Industry Regulatory Commission isrecognized as the biggest independent securities regulation agency for allfirms operating in the United States. FINRA commits to safeguard the interestsof the investor as well as the integrity of the securities market throughefficient regulation and appurtenant compliance and technology-based systems.FINRA covers substantially every aspect of the securities market – beginningwith registration and education of all industry players to evaluation ofsecurities companies, writing regulations, enforcement of such regulations andthe federal securities laws, and the education of the investing public ingeneral. Moreover, FINRA conducts investigations and other regulatory tasks forequities and options markets, including trade updates and other relatedindustry services. Finally, FINRA serves as the main administrator forresolutions of disputes for investors and securities firms.
Toobtain more information, kindly visit www.finra.org.