May 30, 2012
PeoplesVC.com is an equity-based Crowdfunding Portal.
We have built an on-line calculator tool that allows investors to enter their income and net worth and the tool computes for them what they are allowed to invest over a 12 month period in crowdfunded companies.
During this process we noted a problem with the way the Crowdfunding Act was written. The issue is that there are certain scenarios where the amounts cannot be computed because of a problem with the logic of the law.
Before we explain the issue, we present here the actual text of the law:
(B) the aggregate amount sold to any investor by
an issuer, including any amount sold in reliance on the
exemption provided under this paragraph during the 12-
month period preceding the date of such transaction, does
(i) the greater of $2,000 or 5 percent of the annual
income or net worth of such investor, as applicable,
if either the annual income or the net worth of the
investor is less than $100,000 and
(ii) 10 percent of the annual income or net worth
of such investor, as applicable, not to exceed a max-
imum aggregate amount sold of $100,000, if either
the annual income or net worth of the investor is equal to or more than $100,000
When this formula is applied, either part (i) should be true OR part (ii) should be true. In no instance should part (i) AND part (ii) be true or there is no way to calculate the answer.
If you take a scenario where an Investors Income is $110,000 and his/her Net worth is $90,000 and apply these numbers to the logic of the law, you get these results:
Part (i) is TRUE because "either the annual income or the net worth of the investor is less than $100,000"
Part (ii) is TRUE because "either the annual income or net worth of the investor is equal to or more than $100,000"
So we at PeoplesVC.com are confused and hoping to receive some clarification because we are unable to interpret the law as it is written.