The prospects of a new era of crowd-funded startups took another jump forward today as the Securities and Exchange Commission told FundersClub, a website that lists new companies seeking funding, that its business model doesn’t violate federal securities rules.
FundersClub, which promises “insider access to pre-vetted startups,” faced legal uncertainty because it lets investors make investments as low as $1,000 in exchange for equity, even though it’s not a registered broker. Instead, the company, which is itself a start-up that grew out of the Y-Combinator incubator, holds itself out as a venture-capital adviser that does not take transaction-based commissions but instead takes management fees from accredited investors.
To verify its legal status, FundersClub wrote the SEC to request formal validation of its business model. In a letter, reported by TechCrunch, the SEC stated that it would not pursue enforcement action against the company.
In a significant footnote in…
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