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Federal Crowdfunding Goes into Effect on May 16, 2016

On Behalf of | May 10, 2016 | JOBS Act, Private Placements, Raising Capital, Securities Laws, Uncategorized

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? A Discussion of the Texas Crowdfunding Exemption.” We have also covered some cautionary tales warning funding portals and investors alike–see “Eureeca: A Cautionary Tale on How Not To Do Crowdfunding,” “Update on Eureeca Capital,” and “SEC Investor Alert: Ascenergy LLC Oil and Gas Crowdfunding Scheme.” As the final rules are just going into effect, how this brand new exemption from the federal registration requirement will work in practice is yet to be seen.  Nevertheless, it is expected to be a process of trial and error to strike the right balance between encouraging capital raises and protecting the investing public.

In this new series, we will write about updates on federal crowdfunding, discussing the following materials, among other things:

  • SEC investor alert on crowdfunding;
  • SEC small entity compliance guide on registration of funding portals;
  • FINRA (Financial Industry Regulatory Authority, Inc.) funding portal rules; and
  • Recent legislative activity to bring about changes to the CROWDFUND Act.

Stay tuned for blogs on these topics in the coming weeks.


This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant 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.

 Steps have been taken to verify the contents of this article prior to publication. However, readers should not, and may not, rely on this article. Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.

 About the Author

Shawn McBride is the Managing Member of The R. Shawn McBride Law Firm, PLLC, which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: 407-517-0064; [email protected], or


[1] 15 U.S.C. § 77d(a)(6).