Regulation CF Archives - Page 4 of 5

CROWDFUNDING FROM A TO Z

As the expected deadline for the SEC to publish rules and regulations enacting the Crowdfunding Act (Title III of the Jumpstart Our Business Startups Act (JOBS Act)) grows nearer, it is a good time for a complete overview of crowdfunding. New Sections 4(6) and 4A of the Securities Act of 1933 codify the crowdfunding exemption and its various requirements as to Issuers and intermediaries. The SEC is in the process of drafting the underlying rules and regulations which will implement these new statutory provisions.

A. WHAT IS CROWDFUNDING?

The Crowdfunding Act amends Section 4 of the Securities Act of 1933 (the Securities Act) to create a new exemption to the registration requirements of Section 5 of the Securities Act. The new exemption allows Issuers to solicit “crowds” to sell up to $1 million in securities as long as no individual investment exceeds certain threshold amounts.

The threshold amount sold to any single investor cannot exceed (a) the greater of $2,000

October 4, 2012

Crowdfunding Direct Public Offerings

Background:

As a reminder, on April 5, 2012 President Obama signed the JOBS Act into law. Part of the JOBS Act is the Crowdfunding Act, the full title of which is the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012”. The Crowdfunding Act creates a new exemption to the registration requirements under a newly designated Section 4(6) of the Securities Act of 1933, as amended. Although the Crowdfunding Act is, by definition, an exemption from the registration requirements and therefore a new form of private placement, innovative and forward thinking minds have already come up with a method of utilizing the crowdfunding methodology for a public, registered offering.

What is a crowdfunding registered offering:

A crowdfunding registered offering is a combination of direct public offering (DPO) and initial public offering (IPO). As I have blogged about in the past, a DPO is like an IPO except the Issuing Company does not use an underwriter to

August 21, 2012

FINRA Seeks Public Comment in Advance of Crowdfunding Rulemaking

The Financial Industry Regulatory Authority (FINRA) has requested public comment and input in advance of preparing and publishing proposed rules related to the Crowdfunding Act. The scope of the FINRA rules will be written specifically for registered funding portals and although they will need to be complementary to the SEC rules, it is intended that they not be duplicative. FINRA has set August 31, 2012 as the deadline for receiving comments.

As Related to Registered Funding Portals

Section 302 of the Crowdfunding Act requires that all Crowdfunding offerings be conducted through an intermediary that is a broker dealer or funding portal that is registered with the SEC. Section 304 of the Crowdfunding Act provides that Funding Portals are exempt from the broker dealer registration requirements, as long as they are registered with the SEC as Funding Portals and follow all such registration and ongoing rule and reporting requirements. In accordance with Section 304, Funding Portals must be “subject

July 10, 2012

SEC Still on Track to Meet the 270 Deadline to Enact Crowdfunding Rules

The SEC is still on track and expects to meet the 270 day deadline to draft rules and enact Title III of the JOBS Act creating the new crowdfunding exemption.

As I wrote about before the July 4^th holiday, on June 25^th, in prepared testimony, Mary Schapiro told a U.S. House oversight panel that certain rule writing deadlines imposed by the JOBS Act “are not achievable.” In particular, the SEC could not meet the 90 day deadline to amend Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under, to eliminate the prohibition on general solicitation and general advertising in a Rule 506 offering, so long as all purchasers in such offering are accredited investors. “The 90-day deadline does not provide a realistic timeframe for the drafting of the new rule, the preparation of an accompanying economic analysis, the proper review by the commission, and an opportunity for public input,” she said.

However

July 10, 2012

Crowdfunding Act – What about state securities laws?

On April 5, 2012 President Obama signed the JOBS Act into law. Part of the JOBS Act is the Crowdfunding Act, the full title of which is the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012”. The SEC has been mandated with the task of drafting the crowdfunding rules and regulations by early 2013.

Introduction

In addition to federal securities laws, each state has its own securities laws and governing body which oversees and enforces such laws. The individual state securities statutes are not uniform – every state is different. However, many aspects of federal securities law pre-empt state securities laws. This is a major advantage to issuers because abiding by the myriad of disclosure and pre and post-filing requirements of the federal statutes and individual state statutes concurrently is an arduous and expensive effort.

For instance federal law does not pre-empt state law for a Rule 505 offering, but it does for a Rule 506

June 14, 2012

Crowdfunding Intermediaries-Questions

Intermediary Use and Registration Requirements

Section 302 of the Crowdfunding Act requires that all Crowdfunding offerings be conducted through an intermediary that is a broker dealer or funding portal that is registered with the SEC and a member of a securities organization registered under Section 15A of the Securities Exchange Act of 1934. Currently that securities organization is the SRO, Financial Industry Regulatory Authority (FINRA).

The Crowdfunding Act carves out a new class of “broker dealer” called “Funding Portals” that can act as Crowdfunding intermediaries. Section 304 of the Crowdfunding Act provides that Funding Portals are exempt from the broker dealer registration requirements, as long as they are registered with the SEC as Funding Portals and follow all such

June 5, 2012

Resale of Crowdfunding Securities And An Aftermarket

In accordance with Section 302(e) of the Crowdfunding Act, the securities issued in a crowdfunding offering are restricted securities. The Crowdfunding Act states that the securities purchased in a crowdfunding offering may not be resold during a one year holding period, beginning on the date of purchase, unless such securities are transferred (A) to the issuer of the securities; (B) to an accredited investor; (C) as part of an offering registered with the SEC; or (D) to a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance, in the discretion of the SEC. To a layman this provision may seem straight forward and innocuous enough, it’s not!

SEC Will Need To Draft New Rules

The SEC will need to draft new rules to cover these re-sale restrictions as they do not fit within the parameters of the current rule regarding the resale of restricted

June 1, 2012

More Information on Crowdfunding Requirements for Issuers

On April 5, 2012 President Obama signed the JOBS Act into law. Part of the JOBS Act is the Crowdfunding Act, the full title of which is the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012”. The Crowdfunding Act, creates a new exemption to the registration requirements under a newly designated Section 4(6) of the Securities Act of 1933, as amended.

On May 23, 2012 I blogged about crowdfunding requirements for Issuers as summarized in the text of the Crowdfunding Act (the “Act”). This blog continues that discussion providing further information from the Act.

The new crowdfunding exemption allows Issuers to raise up to $1 million in a twelve month period, as long as no individual investment exceeds certain threshold amounts. The threshold amount sold to any single investor, cannot exceed (a) the greater of $2,000 or 5% of the annual income or net worth of such investor, if their annual income or next worth

June 1, 2012

SEC Staff Meeting with National Crowdfunding Association

On May 14, 2012, the SEC staff met with representative of the National Crowdfunding Association to discuss issues regarding the implementation of Title III of the JOBS Act, i.e. the Crowdfunding Act. The SEC posted a memo on the meeting, which is available for review on the SEC website. This blog summarizes the memo, which memo was prepared by the National Crowdfunding Association prior to the meeting as an agenda and discussion memo and was subsequently posted on the SEC website, by the SEC.

National Crowdfunding Association Compiles List of Issues and Comments

The National Crowdfunding Association set forth a list of issues and comments on the pending Crowdfunding Act SEC rules and regulations. Unless otherwise stated, I agree with and support all of the comments and issues discussed by the National Crowdfunding Association.

The issues and comments are summarized as follow:

1. Investment Limitations. The crowdfunding exemption allows Issuers to raise up to $1 million in a twelve

May 25, 2012

CFIRA Submits Crowdfunding Letter to SEC

The CFIRA (Crowdfund Intermediaries Regulatory Advocates) was established by crowdfunding industry professionals for the purpose of working with the SEC and FINRA on establishing and maintaining crowdfunding rules and industry practices. As I blogged in the past, I believed at one point, based on news and information released from the CFIRA, that the CFIRA intended to become a self regulatory organization (SRO) and register with the SEC under Section 15A. As of today, it appears that the CFIRA is still working towards the goal of becoming an SRO. In any event, I expect that the CFIRA will be an active participant in the crowdfunding industry and invaluable source of input and information.

CFIRA and the SEC

On May 15, 2012, the CFIRA submitted a comment letter to the SEC regarding the pending Crowdfunding regulations. The comment letter specifically addressed issues regarding how the general solicitation rules will interact with social media and the internet. The letter addressed the general solicitation

May 24, 2012

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Regulation CF

CROWDFUNDING FROM A TO Z

Crowdfunding Direct Public Offerings

FINRA Seeks Public Comment in Advance of Crowdfunding Rulemaking

SEC Still on Track to Meet the 270 Deadline to Enact Crowdfunding Rules

Crowdfunding Act – What about state securities laws?

Crowdfunding Intermediaries-Questions

Resale of Crowdfunding Securities And An Aftermarket

More Information on Crowdfunding Requirements for Issuers

SEC Staff Meeting with National Crowdfunding Association

CFIRA Submits Crowdfunding Letter to SEC

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