Your Business Deserves To Thrive
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…
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…
Texas Crowdfunding Portal Registration and Activities (in Detail). Simplified/Streamlined Registration Process. The simplified registration process for TCPs, which we discussed previously, is designed so that TCPs are subject to fewer regulatory requirements than general securities dealers, because they are limited in what they can do.[1] No Investment Advice. Of note, a TCP is prohibited from offering investment advice or recommendations,…
Texas Crowdfunding Portal Registration and Activities. As we mentioned previously, an offering conducted under the crowdfunding exemption must be made exclusively through an Internet website operated by a registered general dealer or registered TCP. Local Character. Just like crowdfunding issuers, a TCP must be an entity formed and authorized to do business in Texas.[1] A TCP should be physically located…
How Should the Offering Be Conducted? Must Use a website. An offering conducted under the crowdfunding exemption must be made exclusively through an Internet website operated by a registered general dealer or registered TCP.[1] Such website must meet the following requirements: A disclaimer that access to the website and offers and sales of the securities are limited to Texas residents;…
Who Is Eligible? Texas Formation. Texas crowdfunding exemption is only available if the issuer is a Texas entity that has filed a certificate of formation with the Texas Secretary of State and is authorized to do business in Texas.[1] This means that sole proprietor, general partnerships, or joint ventures would not be eligible to use the exemption, as those types…
In our previous blog series titled “Crowdfunding: Is It Right for My Business?”, we discussed Title III of the JOBS Act, popularly known as the “CROWDFUND Act (Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012),” which would exempt crowdfunded securities from the federal registration requirement. On October 30, 2015, the Securities and Exchange Commission (‘SEC”) finally…
Investor Qualification. Each time before accepting any investment commitment, an intermediary must have a reasonable basis for believing that the investor satisfies the investment limitations discussed above; in doing so, an intermediary may rely on an investor’s representations concerning the investor’s annual income, net worth, and the amount of the investor’s other investments made under the crowdfunding exemption, unless the…
Funding Portal Registration. As expected, a funding portal must register with the SEC by filing a complete Form Funding Portal (to be amended whenever previously submitted information becomes inaccurate) and become a member of a national securities association[1]; a funding portal that is registered this way is exempt from the broker registration requirements.[2] A non-U.S. portal can register, too, but…
Intermediaries. All crowdfunding must be done through an intermediary. No issuer can do crowdfunding directly without hiring one. The Act imposes various requirements on crowdfunding intermediaries.[1] For starters, intermediaries have to register with the SEC as a broker or as a funding portal and become a member of a national securities association.[2] Under the final rules, intermediaries would also have…