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SEC OKs Credit Card Use for Online Fund

Silicon Valley venture capital firm Technology Funding said today that it gained SEC (Securities and Exchange Commission) approval to accept credit cards for the online purchase of shares in its public fund, Technology Funding Venture Capital Fund VI (VC-6).

According to the company, the SEC nod of approval is the first time that investors have been able to use a credit card to invest in a newly issued security. VC-6 is a venture capital fund aiming to garner $100 million in what is being touted as the first electronic securities offering in the U.S.

Technology Funding said it employs Secure Sockets Layer (SSL) systems to protect credit card and other sensitive information sent from the investor computer to the VC-6 server. The firm plans to adopt the Secure Electronic Transaction (SET) protocol when it gains acceptance by major credit card companies.

The fund, open to investors since January, has been in a limited test mode. The prospectus and subscription agreement are available exclusively via the Internet.

Prospective investors can purchase shares in VC-6 using a major credit card or bank transfer through the automated clearing house (ACH) system. Old-fashioned paper checks are also allowed for share purchases.

Potential investors are advised by the company to use their credit cards solely for payment purposes. Carrying a balance on a credit card or obtaining a new credit card to purchase shares is not recommended since finance charges lower any possible investment returns.

"It's safer to make a credit card purchase over the Internet than it is to give your card to a waiter at a restaurant," said Technology Funding Vice President Jody Sherman. "Consumers will migrate to online investing just as they have to purchasing music and books via the Internet, where credit cards are the only method of payment offered."