What is the '2000 Investor Limit'

This Securities & Exchange Commission (SEC) stipulation requires a company that exceeds 2,000 individual investors with more than $10 million in assets to file its financials with the commission. According to SEC rules, such a company has 120 days to file following its fiscal year's end.

BREAKING DOWN '2000 Investor Limit'

The 2,000 investor limit or rule is a key threshold for private businesses which do not wish to disclose financial information for public consumption. Congress raised the limit from 500 individual investors in 2016 as part of the the Jumpstart Our Business Startups Act (JOBS) and Title LXXXV of the Fixing America’s Surface Transportation Act (FAST). The revised rules also specify a limit of 500 persons who are not accredited investors before public filing is required.

The prior threshold had been 500 holders of record without regard to accredited investor status. Congress began debating an increase in the limit in the wake of the 2008 recession and an explosion in online businesses, some of which complained that they were growing so fast that the disclosure rules had become a burden at too early a stage of their lifecycle. The JOBS Act also set up a separate registration threshold for banks and bank holding companies, allowing them to terminate the registration of securities or suspend reporting if that class of shares is held by less than 1,200 people.

Crowdfunding Connection

The JOBS Act revisions to SEC rules helped facilitate the growth of crowdfunding platforms, which are able to raise money from individual investors online without providing detailed financial data. The rules established limits on how much individuals can invest in SEC-approved crowdfunding platforms as a percent of the lesser of their annual income or net worth

The individual limits for crowdfunding, through an investment portal approved by the SEC, as of May 2017:

If either your annual income or your net worth is under $107,000, during any 12-month period, you can invest up to the greater of either $2,200 or 5 percent of the lesser of your annual income or net worth. 

If both your annual income and net worth are $107,000 or more during any 12-month period, you can invest up to 10 percent of your annual income or net worth, whichever is less, not to exceed $107,000. 

These calculations don't include the value of your home. FINRA has all the details on crowdfunding and income limits plus some tips on how to protect yourself.

RELATED TERMS
  1. Accredited Investor

    Accredited investor has the financial sophistication and capacity ...
  2. Donation-Based Crowd Funding

    Donation-based crowd funding is seeking small amounts of money ...
  3. Securities And Exchange Commission ...

    The Securities and Exchange Commission (SEC) is a U.S. government ...
  4. SEC POS AM Filing

    An SEC POS AM filing is one that is made by companies that have ...
  5. SEC Form 2-A

    SEC Form 2-A is a filing with the SEC required to disclose the ...
  6. SEC Form 18

    SEC form 18 is an SEC filing that is more commonly known as the ...
Related Articles
  1. Investing

    Crowdfunding for Non-Accredited Investors

    JOBS allows non-accredited investors to participate in crowdfunded investments, learn how crowdfunding platforms can work to your advantage to be funded.
  2. Insights

    Understand the SEC Rules on Equity Crowdfunding

    The SEC's adoption of equity crowdfunding rules, initiated under the JOBS Act, enables small investors to invest in companies that show early potential.
  3. Tech

    Invest through Equity Crowdfunding: Risks and Rewards

    Investing through equity crowdfunding carries risks such as risk of failure, fraud and doubtful returns. But it also offer a number of rewards.
  4. Small Business

    Crowdfunding Rule Lets Anyone Invest in Startups

    As of Monday, a belated provision of the 2012 JOBS Act goes into effect, allowing anyone and everyone to participate in fundraising for private companies and receive stakes in potentially high-growth ...
  5. Small Business

    Equity Crowdfunding Sites Disrupt Banking and VC

    Equity crowdfunding is poised to revolutionize the way companies are funded and disrupt the traditional private equity, banking and venture capital industries.
  6. Investing

    Real Estate and Crowdfunding: A New Path For Investors

    Real estate investing and crowdfunding - are they a good mix?
  7. Insights

    The Rise of Alternative Economics

    Alternative economics has provided businesses, borrowers and lenders with the opportunity to overcome restrictions such as tight credit and low interest rates.
  8. Small Business

    Angel Investing vs. Crowdfunding: How to Raise Money for Your Startup?

    Angel investing and crowdfunding are two very different options startups can use to get the funding they need.
  9. Investing

    REITs Vs. Real Estate Crowdfunding: How They Differ

    There are a few different ways to go about investing in real estate, the two biggest are through REITs and a newcomer to the game: real estate crowdfunding.
  10. Personal Finance

    Is Crowdfunding Student Loans a Viable Option?

    More grads are trying to crowdfund student loans at sites such as GoFundMe. Does it work?
RELATED FAQS
  1. What is real estate crowdfunding?

    Invest directly in real estate projects through crowdfunding. Currently only open for accredited investors, the SEC is working ... Read Answer >>
  2. What are unregistered securities or stocks?

    Before securities, like stocks, bonds and notes, can be offered for sale to the public, they first must be registered with ... Read Answer >>
Trading Center