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
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
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
Crowdfunding intermediaries- Hurry Up and Wait
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”. I think the acronym came first, but applaud the creativity.
I have been blogging extensively on the JOBS Act and Crowdfunding Act. My last blog addressed Herculean effort the SEC must undertake to write the laws and rules which will bring the Crowdfunding Act to fruition by early 2013. In addition to fashioning the exemption that will allow companies to raise funds using the Crowdfunding Act, the SEC must also fashion rules to govern the funding portals that companies will be required to use in the process.
Funding Portals are popping up everywhere, at least in name and concept. All of these portals are busy putting together systems internally, but all of those systems are subject to the SEC
SEC Grapples With Crowdfunding Rulemaking
On April 5, 2012 President Obama signed the JOBS Act into law.
The SEC’s Rulemaking Duty
Some of the rules went into effect immediately; others are in the drafting process. Within 90 days of the signing of the Act (i.e. mid July), the SEC is required to issue enabling rules as to other portions of the Act, including rules related to general solicitation and advertising of accredited investors under Rule 506 of Regulation D. For the SEC that is the easy part.
Finally, the SEC has up to 270 days (beginning of 2013) to release rules relating to the new crowdfunding exemption and crowdfunding platform portal regulations. That will be difficult part. As a matter of background, the biggest opponents of the crowdfunding bill were the SEC and FINRA. It is easy to see why, the SEC’s mission, direct from their website is:
“The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly,
SEC Issues Guidance on Title 1 of the JOBS Act
On April 5, 2012 President Obama signed the JOBS Act into law. Some of the rules went into effect immediately; others are busily in the drafting process. The SEC has begun issuing guidance and it is expected will continue to do so often.
On April 16, 2012, the SEC issued guidance on Title 1 of the JOBS Act. The full text of this guidance is available on the SEC website. Title 1 of the JOBS Act provides scaled- down business disclosure for Emerging Growth Companies (EGC’s) effectively treating them as small business issuers. In particular, EGC’s need only provide two years of audited financials (instead of 3) for a registration of an IPO; are treated as small businesses for the reporting of executive compensation; have no Sarbanes-Oxley Act 404(b) auditor attestation requirements and are able to test the waters with communications to QIB’s and institutional accredited investors prior to an offering.
Determining When and If a Company Qualifies As
Crowdfunding Timing and Investor Protections
On April 5, 2012 President Obama signed the JOBS Act into law.
Some of the rules went into effect immediately, such as the ability of an Emerging Growth Company to file a registration statement and seek confidential treatment during the review process. For this process the EGC would avail itself of the new Securities Act Section 6(e). The SEC issued, albeit limited, guidance on this process for EGC’s yesterday, April 10, 2012.
Within 90 days of the signing of the Act (i.e. mid July), the SEC is required to issue enabling rules as to other portions of the Act, including rules related to general solicitation and advertising under Regulation D. Finally, the SEC has up to 270 days (beginning of 2013) to release rules relating to the new crowdfunding exemption and crowdfunding platform portal regulations.
Crowdfunding Has Been Around For Several Years
It seems to many that the JOBS Act appeared, was enacted into law and is zooming forward
Crowdfunding Act Signed Into Law
On April 5, 2012 President Obama signed the JOBS Act into law. In accordance with the JOBS Act requirement that all crowdfunding platforms (i.e. websites and intermediaries) be a member of a national securities association, the new self regulatory organization (SRO), The Crowdfunding Intermediary Regulatory Association (CFIRA) has already been formed. The CFIRA will be charged with ensuring investor protection and market integrity. The CFIRA will have members from crowdfunding investor intermediaries as well as related industries such as venture capital firms. In addition to regulating its members, the CFIRA will provide investors with information such as learning about crowdfunding and its risks.
Opportunity For All Americans
Crowdfunding provides an opportunity for all Americans, whether accredited or not, and whether connected with an elite investment banking firm or not, to invest small amounts of money in small businesses that they know or just believe in. Small businesses provide jobs and sometimes small businesses become big businesses. For the first time
Crowdfunding 101
As I recently blogged, the President has signed the Jobs Act including the much anticipated Crowdfunding bill. Crowdfunding is a process whereby companies will be able to raise small amounts of money either directly off their own website or using intermediaries set up for the purpose. The Securities Act of 1933, as amended, (Securities Act) prohibits the sale or delivery of any security unless such security is either registered or exempt from registration. Crowdfunding will be an exemption from registration. The exemption will likely be codified as a new and separate exemption likely under Regulation D and will include an overhaul of the current general provisions of Regulation D found in Rules 501-503.
Crowdfunding Exemption Possibilities
The exemption will likely be limited to $1 million in any twelve (12) month period, or up to $2 million if the company provides certain financial disclosure such as audited financial statements. As proposed, each investor will be limited $10,000 or 10%
