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Federal Crowdfunding–Finally Here–Goes into Effect on May 16, 2016 (Part IV)

May 31, 2016

FINRA’s Funding Portal Rules.

The federal crowdfunding final rules require that each intermediary in a crowdfunding transaction be registered with the Securities and Exchange Commission (“SEC”) either as a broker-dealer or a funding portal and be a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), which is currently the only registered national securities association. For details of the final rules, including registration and disclosure requirements for intermediaries, please see our previous series “Is It Time To Do Crowdfunding To Raise Money?: SEC Releases Federal Crowdfunding Final Rules.” FINRA has finalized its funding portal rules and the SEC approved them on January 29, 2016, making them effective as of that date.Read the rest

Federal Crowdfunding–Finally Here–Goes into Effect on May 16, 2016 (Part III)

May 24, 2016

SEC: A Small Business Compliance Guide on Registration of Funding Portals.

On February 29, 2016, the Securities and Exchange Commission (“SEC”) issued “A Small Entity Compliance Guide: Registration of Funding Portals.” [1] The full text of the investor bulletin is available here. One of the requirements for crowdfunding under JOBS Act is that it be done through an intermediary; no issuer can do crowdfunding directly without using one. [2] For details of the final rules, including registration and disclosure requirements for intermediaries, please see our previous series “Is It Time To Do Crowdfunding To Raise Money?: SEC Releases Federal Crowdfunding Final Rules.” The compliance guide focuses only on the registration requirements.Read the rest

Federal Crowdfunding–Finally Here–Goes into Effect on May 16, 2016 (Part II)

May 17, 2016

SEC Investor Bulletin: Crowdfunding for Investors.

Crowdfunding under federal law became legal on May 16, 2016, but efforts to prep potential investors and intermediaries have been in the works for much longer. On February 16, 2016, the Office of Investor Education and Advocacy of the Securities and Exchange Commission (“SEC”) issued “Investor Bulletin: Crowdfunding for Investors” [1] to educate investors about what it means to make a crowdfunding investment, what to keep in mind, and how. The full text of the investor bulletin is available here.Read the rest

Federal Crowdfunding Goes into Effect on May 16, 2016

May 10, 2016

It is official—federal crowdfunding finally goes into effect on May 16, 2016.

Title III of the JOBS Act, also referred to as the “CROWDFUND Act (Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012),” exempts up to $1 million crowdfunded securities from the federal registration requirement when the transaction is conducted through an intermediary that is either a broker or a funding portal.[1] For a detailed analysis of the federal law and related topics, please see our previous posts “Crowdfunding: Is It Right for My Business,” “Is It Time To Do Crowdfunding To Raise Money?: SEC Releases Federal Crowdfunding Final Rules,” and “An Easy Way for Texas Companies To Raise Money?Read the rest

Additional Ways I Can Sell or Allocate Ownership of My Company Without Registering Stock, LLC or Other Interests: Discussion of Common Exemptions Roundup (Post 3)

February 23, 2016

Employee Equity Compensation Under Rule 701.

Rule 701 allows companies to offer securities to their employees and certain other persons without the need to file a registration statement.  Specifically, non-reporting or private companies may offer and sell securities under a written compensatory benefit plan or contract for their employees, directors, general partners, trustees, and officers, as well as consultants and advisors who are natural persons and provide bona fide services outside of a capital-raising transaction.[1]  A “compensatory benefit plan” is defined as “any purchase, savings, option, bonus, stock appreciation, profit sharing, thrift, incentive, deferred compensation, pension, or similar plan.”[2]  The SEC’s policy consideration behind adopting this rule was that it would be an unreasonable burden to require private companies, many of which are small businesses, to incur the expenses and disclosure obligations of public companies when they offer securities to their employees for compensatory, rather than capital-raising, purposes.… Read the rest

Additional Ways I Can Sell or Allocate Ownership of My Company Without Registering Stock, LLC or Other Interests: Discussion of Common Exemptions Roundup (Post 2)

February 16, 2016

Offshore Offerings Under Regulation S.

Companies that want to go outside of their own state for an alternative source of capital but do not want to go through the registration requirements might want to consider Regulation S.  Regulation S provides an exemption for offers and sales of securities, debt or equity, outside the United States, on the following general conditions:

  • The offer or sale is made in an offshore transaction; and
  • No directed selling efforts are made in the United States, meaning no activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the securities offered, such as an advertisement in a publication with a general circulation in the United States.
Read the rest

Additional Ways I Can Sell or Allocate Ownership of My Company Without Registering Stock, LLC or Other Interests: Discussion of Common Exemptions Roundup (Post 1)

February 9, 2016

Exempt Offerings for Other Types of Markets or Purposes.

In our previous blog series on raising capital through exempt offerings (available here), we looked at some of the most commonly used exemptions from the federal registration requirements, including those under the JOBS Act.  In another blog series on Regulation D offerings (available here), we focused on various exemptions under Regulation D and discussed why Rule 506 remains the most dominant exemption of all to date.  In all likelihood, the exemptions covered in those two series are about all of the common exemptions that companies seeking to raise capital in the United States would consider absent special circumstances, but there are also exemptions that are designed for other types of markets or purposes.  … Read the rest

Clarifying How Companies Can Raise Money: Making Things a Little Clearer And, Perhaps, Easier? SEC Proposes Amendments to Rule 147 Intrastate Exemption and Rule 504 of Regulation D (Part 2)

January 14, 2016

More on the Rules for an Offering in a Single State

Rule 147 Intrastate Exemption: Proposed Amendments.

The proposed amendments would: (1) eliminate the current restriction on offers, while continuing to require that sales be made only to residents of the issuer’s state; and (2) redefine what it means to be an “intrastate offering” and ease some of the issuer eligibility requirements, among other things. The SEC noted that the use of the Internet for offerings makes it difficult for issuers to limit offers to in-state residents, especially in the context of intrastate crowdfunding.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.