(RaiseMoney.com) -It takes a life-long pioneer in the insurance industry to know best when to grab first mover advantage whenever a new landscape appears, as evidenced by Tuesday’s announcement from New York-based global insurer AIG, which says it will be the first to offer crowdfund insurance for investors in equity crowdfunding deals. Below extract is courtesy of coverage by WSJ reporter Leslie Scism.
(WSJ) American International Group is giving crowdfunding a try. Not to raise money for startups, but to help allay investors’ concerns about being ripped off as they invest in small businesses through this new type of funding.
The New York company is set to launch what it is calling “Crowdfunding Fidelity,” an insurance product developed to protect investors on equity crowdfunding platforms against fraud.
In announcing the new coverage Tuesday morning, AIG noted that there have been few instances of fraud in the sector so far. But it said its new product would help to build investor trust to ensure underlying issuer trustworthiness.
“As a sector still in its infancy, equity crowdfunding platforms are only as strong as the confidence they instill in their investors,” said Lex Baugh, AIG’s president of liability and financial lines, in a news release.
The coverage isn’t available to protect against just any crowdfunding project. So-called equity crowdfunding offers investors stakes in a company. Earlier this month, new U.S. rules kicked in under which ordinary investors—not just wealthy individuals, or so-called accredited investors—can participate in such offerings. The fundraising option originates from the 2012 Jumpstart Our Business Startups Act, or JOBS Act.
AIG will sell the coverage only to those portals it has determined have adequate processes in place to check out backgrounds of the businesses they allow to sell equity stakes, Mr. Baugh said.
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