Regulation Crowdfunding; Section 4(a)(6) Archives - Page 3 of 5

Proposed Crowdfunding Rules – Part III

As required by Title III of the JOBS Act, on October 23, 2013, the SEC has published proposed crowdfunding rules. The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire text of the rule release is available on the SEC website. In a series of blogs, I am summarizing the lengthy rule release. This Part III in my series continues a discussion of the in-depth disclosure requirements for Issuers for use in their offering statements. Part IV will discuss financial disclosure obligations.

Summary Breakdown of Proposed New Rules – Requirements on Issuers

Disclosure Requirements

Pursuant to the CROWDFUND Act as set forth in the JOBS Act, an Issuer who offers or sells securities in a crowdfunding offering must file with the SEC and provide investors and the funding intermediary (whether a funding portal or broker-dealer) and make available to potential investors:

(a) The name, legal status, physical address, and website address of the Issuer (discussed in Part II of

December 10, 2013

Proposed Crowdfunding Rules – Part II

Background

Crowdfunding generally is where an entity or individual raises funds by seeking small contributions from a large number of people. The crowdfunder sets a goal amount to be raised from the crowd with the funds to be used for a specific business purpose. In addition, a crowdfunding campaign allows the crowd to communicate with each other, thus adding the benefit of the “wisdom of the crowd.” Small businesses can particularly benefit from crowdfunding as they are not limited by

December 3, 2013

Proposed Crowdfunding Rules – Part I

Background

Title III of the JOBS Act, called the Crowdfund Act, amends Section 4 of the Securities Act of 1933 (the Securities Act), adding new Section 4(a)(6) to

November 19, 2013

State Crowdfunding Using Intrastate Offerings and Rule 147

The SEC has yet to publish proposed rules under Title III of the JOBS Act – the Crowdfunding Act. The Crowdfunding Act amends Section 4 by 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 or 5% of the annual income or net worth of such investor, if their annual income or net worth is less than $100,000; and (b) 10% of the annual

September 10, 2013

Crowdfunding Using Regulation A? Yes, You Can- Right Now!

As everyone waits for the SEC to begin rule making on Title III of the JOBS Act, a few innovative entrepreneurs are using Regulation A as a vehicle to crowdfund today.Although the procedure, as described in this blog, is not the crowdfunding procedure that will be implemented under Title III of the JOBS Act, it does allow for the use of social media and the Internet to solicit and obtain equity investment funds from the general population including unaccredited investors, of a particular state or states.

Moreover, the laws that allow for this method of fundraising are not new.The vehicle of choice is Regulation A—the existing Regulation A, not the new Regulation A+, which will be implemented under Title IV of the JOBS Act. Using Regulation A to offer securities involves the time and expense of a registered offering; however, the registered securities are free trading and may be offered to unaccredited investors.Regulation A does not preempt state

June 19, 2013

Implementation Of The Elimination Of The Prohibition Against Advertising For Private Accredited Investor Offerings And The Crowdfunding Act, Continues To Be Delayed

The annual “SEC Speaks” conference, in which Securities and Exchange Commission (SEC) representatives review the agency’s efforts over the past year and preview the year to come, was held on February 22-23, 2013.

During the conference the SEC laid out the numerous items on its agenda for the year to come and beyond. The list included the careful implementation of the various titles of the JOBS Act, including Title II and Title III.

Title II of the JOBS Act provides that the SEC will 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. Although on August 29, 2012 the SEC published proposed rules implementing Title II, those rules have been met with numerous comments and opposition and it is entirely unclear how the SEC shall proceed.

February 27, 2013

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

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Regulation Crowdfunding; Section 4(a)(6)

Proposed Crowdfunding Rules – Part III

Proposed Crowdfunding Rules – Part II

Proposed Crowdfunding Rules – Part I

State Crowdfunding Using Intrastate Offerings and Rule 147

Crowdfunding Using Regulation A? Yes, You Can- Right Now!

Implementation Of The Elimination Of The Prohibition Against Advertising For Private Accredited Investor Offerings And The Crowdfunding Act, Continues To Be Delayed

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

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