American investors will be able to take a punt on start-ups via crowdfunding from Monday, prompting a last minute word of warning from regulators.
Changes from top financial watchdog the SEC mean equity crowdfunding for the average punter nationwide will be a reality next week.
Initially, only accredited investors, those with $1mln in net worth or who earn at least $200,000 per year, were allowed to get involved.
Ahead of the move, another regulator, FINRA, urged the general public on Friday to weigh up the risks before buying shares.
“Crowdfunding generates a lot of buzz, and the possibility of getting in on the ground floor of the next great start-up can be very tempting,” said Gerri Walsh, FINRA’s senior vice president of investor education.
“But as with any new type of opportunity, investors should step back and first ask the right questions.”
“Investing in unregistered, emerging securities carries significant risk, and investors have to beware the attraction of the shiny, new object and make an informed, rational investment decision.”
Opening the market up to everyday Americans has prompted some foreign firms, including Seedrs, the largest crowdfunding platform in Europe, to set up shop in the US.
Jeff Lynn, Seedrs CEO, said the move “heralds the emergence of equity crowdfunding as a vibrant form of finance in the United States -- just as it has become in the UK and Europe.”
- Andrew Neil