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SEC Improves e-Capital Raising

By Jonathan Bick
April 29, 2008
The Internet provides private companies with a cost-effective way to introduce themselves to many potential investors. It also facilitates efficient capital fundraising opportunities. That stated, the Securities and Exchange Commission's ('SEC') revision of Rule 144 makes raising capital on the Internet easier, and cheaper.

The SEC changed Rule 144 to reduce regulation of restricted securities, which, in turn, facilitates Internet capital-raising.

The Internet, in conjunction with such statutes as the E-sign Act
(114 Stat. 464 (2000) ' codified at 15 U.S.C. '7001 et seq.) ' allows intangible property, including capital stock, to be contracted for and exchanged electronically. Certain capital fundraising, however, was not generally available to Internet users under some SEC regulations ' that is, until recently. In particular, using restricted securities to raise capital electronically is a most helpful strategy for cash-poor Internet startups, because unrestricted securities are less expensive to create than restricted securities, which presented problems.

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