REFILE-Website names tied to crowdfunding spike-NASAA

Wed Dec 5, 2012 4:55pm EST
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By Suzanne Barlyn

Dec 5 (Reuters) - A spike in website names related to crowdfunding suggests an upcoming wave of websites through which small businesses and entrepreneurs could raise investments using the online strategy, state securities regulators said on Wednesday.

The website names have soared to 8,800 from fewer than 900 in January, according to the North American Securities Administrators Association, a Washington-based group of state securities regulators. They are proliferating as businesses await rules from the U.S. Securities and Exchange Commission for structuring crowdfunding deals, the group said.

A future surge of crowdfunding-related websites could also lead to an increase in online investor fraud, NASAA said.

Crowdfunding is a capital-raising strategy in which investors buy small stakes in ventures through various websites. It started as a way to ask many people for small amounts of money to fund everything from documentaries to community projects, often in exchange for a free service or product.

Interest in crowdfunding exploded when President Barack Obama signed the 2012 Jumpstart our Business Startups, or JOBS Act, in April. The law, aimed at boosting small business growth, legalized crowdfunding as a way for businesses to solicit private investors with the promise of potential returns on their money.

Companies, which will be able to raise up to $1 million annually using the strategy, must first wait for SEC rules to be proposed and finalized before soliciting investors. Rules are expected sometime during 2013. Businesses will be required, among other things, to conduct offerings through an SEC-registered intermediary, such as a broker or "funding portal."

The 8,800 website names found by NASAA all included the word "crowdfunding." About 2,000 of those are used by websites that already display content, according to NASAA. The nature of that content is unclear.   Continued...