Investment crowdfunding allows startups to raise significant funds from the public but many fail to meet their reporting obligations to investors. A 2012 law was established to promote democratized investing. Companies must file annual reports with the SEC detailing progress and fund usage. However, most crowdfunded startups ignore this rule, leading to a lack of information for investors. This silence may stem from oversight or operational chaos rather than deceit, but the lack of follow-up leaves investors vulnerable without necessary updates or accountability.
The 2012 law allows startups to raise up to $5 million per year from the public via online platforms like Wefunder and StartEngine, aimed at democratizing investing.
Crowdfunded companies are required to file annual reports with the SEC, meant to show progress and how investor funds are used, ensuring accountability in the system.
A majority of crowdfunded companies ignore the reporting rule, leaving investors uninformed and without updates, despite the intention of increased transparency and accountability.
Limited oversight in investment crowdfunding causes companies to go silent after fundraising, resulting in a lack of information for investors and potential losses.
#investment-crowdfunding #startup-financing #regulatory-oversight #investor-accountability #sec-reporting-rules
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