Crowdfunded Equity Tranches

Definition

A crowdfunded equity tranche is a portion of a company's or project's equity sold to the public under the Securities Act crowdfunding exemption, which requires the offering to run through a registered broker or funding portal.^[1] Under current SEC rules an issuer may raise up to $5,000,000 in 12 months this way, and a non-accredited investor's purchases across all crowdfunding offerings are capped at the greater of $2,500 or 5 percent of income or net worth (or 10 percent, up to $124,000, for higher earners).^[2]

Federal law

A market and contract term. No Act of Congress defines it; the federal laws below apply as described.

1. Jumpstart Our Business Startups Act, Pub. L. 112-106, § 302, 126 Stat. 315. Added Securities Act § 4(6), now § 4(a)(6) (15 U.S.C. § 77d(a)(6)): the crowdfunding exemption, with an original $1,000,000 issuer limit and the broker-or-funding-portal requirement. Official text: govinfo.gov, U.S. Government Publishing Office.

Federal regulations

Rules issued by federal agencies under the laws above.

2. Crowdfunding exemption and requirements, 17 CFR 227.100 (Securities and Exchange Commission). SEC Regulation Crowdfunding: sets the current $5,000,000 12-month issuer limit and the non-accredited investor limits ($2,500 / 5% / 10% / $124,000). Official text: govinfo.gov, U.S. Government Publishing Office.