One of the bugbears of investment crowdfunding is the fact that the laws do not allow special purpose vehicles—legal structures that allow investors to be pooled into a single entity, which streamlines investor communications and management. You also cannot crowdfund an investment fund.
That said, there are exceptions to every rule. Real estate crowdfunding platforms and funds including Streetshares, American Homeowner Preservation and Force for Good Fund, for example, have used the JOBS Act to pool capital from investors. So it pays to understand The Investment Company Act of 1940, the law that governs mutual funds and other pooled investments. Like the Securities Acts of 1933 and 1934, it was created in the wake of the 1929 stock market crash and has been a pillar of financial law for decades. Some say it’s time for an update.
In the meantime, in this guest post, Mark Roderick of Flaster Greenberg explains the 1940s Act and how it can be used in crowdfunding.
Hardly a day goes by without someone asking a question that involves the Investment Company Act of 1940. Although the Act is hugely long and complicated, I’m going to try to summarize in a single blog post the parts that are most important to Crowdfunding.
Why the Fuss?
If you’re in the Crowdfunding space, you don’t want to be an “investment company” within the meaning of the Act:[…]
The post Crowdfunding and The Investment Company Act of 1940 appeared first on Locavesting.
The full and original article can be viewed on Locavesting.com
Visit the Invest With Values - Resource Directory to access leading investor information, opportunities, organizations, events, groups and tools.