According to a new provision approved last month, private companies, hedge funds, venture captalists and private equity companies will not be able to reap profits by selling securities. For almost a century, sales of stocks and similar securities were not allowed to be advertised or solicited in a large scale.

The approval was granted by the Securities and Exchange Commission as part of the United States Congress' 2012 Jumpstart Our Business Act (JOBS Act). The legislation was formulated to allow startups and established companies find investors, acquire funds, and provide jobs.

"Four times as much capital was raised in private placements as was raised in initial public offerings in 2012," said law firm Faegre Baker Daniels. According to the form, the current sales of securities are limited, and that private placements are untapped source of capital for starting companies.

According to law firm Husch Blackwell, startups and entrepreneurs who were not able to create connections with angels and venture capitalists will benefit from the new rule.