New Rules under development by the [Securities Commission of The Bahamas]( would allow entrepreneurs to use crowdfunding to raise up to $1,000,000 and make it easier for small businesses to raise up to $3,000,000 per year.

Crowdfunding Rules as well as Micro, Small and Medium Enterprise (MSME) Rules are being developed to introduce specific regulations for entrepreneurs to use crowdfunding to raise capital, and to ease access to capital market funding by MSMEs. The Rules are anticipated to facilitate much-needed funding for MSMEs via the capital markets while introducing appropriate mechanisms to protect investors.

The proposed Crowdfunding Rules would allow the general public to participate in crowdfund investment offerings within limitations. They would also require that all equity crowdfund activities are conducted on a platform which is registered with the Commission.

Over the next month, the Commission will engage local broker dealers and other industry experts for input on the draft Rules. The Commission is aiming to submit the Rules to the general public for consultation in early 2017, with a view to having the final Rules come into effect shortly after.

To help protect retail (small and/or unsophisticated) investors, the Crowdfunding Rules would limit the amount such persons could invest to $500 per crowdfund arrangement, and $2,500 per year. ‘Accredited’ investors (investors who meet certain wealth, income, institutional or other requirements as defined in securities laws) would not be limited in the amount they can invest via crowdfunding.

Other investor protection features of the draft Rules include capital requirements for registered platforms and defined disclosure requirements for crowdfunding projects and their initiators, including the amount of capital raised and progress reports on initiatives funded using the crowdfund method.

The Rules being developed and proposed for MSMEs would allow small business operators to raise up to $3,000,000 per year in the ‘Over-the-Counter’ (OTC) market without having to file a prospectus with the Commission. Rather, they would be required to file an offering memorandum, which would provide comprehensive information to allow investors to make informed investment decisions. One of the main purposes behind the MSME Rules would be to significantly reduce the costs for small business operators who wish to raise funding for their ventures by directly accessing the capital markets.

To help protect retail investors in MSME offers, the draft Rules would limit the amount of money that such persons could invest to $1,000 per offering and $5,000 per year. As is the case for crowdfunding, accredited investors would not be subject to investment limitations under the draft Rules.

MSMEs spur growth, development, and innovation in an economy, and they account for 60% to 70% of jobs in most Organisation for Economic Co-operation and Development (“OECD”) countries. However, despite the many benefits MSMEs can bring, they suffer from insufficient funding, with commercial bank options unavailable or very costly, and traditional capital market alternatives also often cost-prohibitive. With the development of these new Rules, the Securities Commission is seeking to facilitate capital access in order to address this funding gap.