What are the distinctions of being a crowdfunding investor?

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Being a crowdfunding investor is different than being a shareholder in a publicly listed company.  For example, an individual cannot sell their shares at any time, in contrast to investors holding shares in a publicly listed company. In fact, the individual crowdfunding investors are restricted from reselling their shares for the first year, unless the shares are transferred:

  • to the company that issued the securities;
  • to an accredited investor;
  • to a family member;
  • in connection with your death or divorce or other similar circumstance;
  • to a trust controlled by you or a trust created for the benefit of a family member;
  • as part of an offering registered with the SEC.

Another difference from being a shareholder of a publicly listed company is the amount of information you would receive about your investment. Publicly listed companies generally are required to disclose information about their performances at least on a quarterly and annual basis and on a regular basis about material events that affect the company. In contrast, crowdfunding companies are only required to disclose annually their results of operations and financial statements.

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