Regulation Crowdfunding-Part 2

Part 2

Crowdfunding Requirements for Intermediaries

 The following requirements apply to both broker-dealers and funding portals acting as an intermediary in a transaction involving the sales of securities pursuant to Regulation Crowdfunding (“Regulation CF”):

  • Register with the SEC as a broker or as a funding portal.
  • Register with a self-regulatory organization (“SRO”); the only eligible SRO at present being FINRA.

In addition, intermediaries must also take reasonable steps to prevent fraud and ensure that issuers and investors comply with Regulation CF. Intermediaries may rely on representations from issuers and investors, but at a minimum, intermediaries are required to conduct background checks and securities enforcement regulatory history checks on each officer, director, and 20% owner Read More…

Regulation Crowdfunding-Part 1

Part 1 

On October 30, 2015, the Securities and Exchange Commission (the “SEC”) voted to adopt Regulation Crowdfunding (“Regulation CF”) under the provisions of Title III of the JOBS Act of 2012 (the “JOBS Act”).  The final rules adopted under Regulation CF became effective on May 16, 2016, with entities wishing to act as broker-dealers or “crowdfunding portals” for such offerings starting the application process with the Financial Industry Regulatory Authority, Inc. (“FINRA”) as early as the end of January.

Crowdfunding Requirements for Investors

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Via the creation of Regulation CF, the JOBS Act added a new exemption to the Securities Act of 1933, Section 4(a)(6), to permit securities crowdfunding without registration. The exemption is subject to statutory conditions, however: The aggregate amount that may be sold to “all investors” may not exceed $1 million in any 12-month period.  The caveat of “all investors” allows Regulation CF offerings to be available to both accredited and non-accredited investors.  That said, there are restrictions that have been imposed on how much money may be invested by each investor in such an offering. Read More…