News & Media | JOBS Act

Crowdfunding 2.0: Even You Can Invest in the Next High Growth Startup

A new legal framework changes the rules of the game for U.S. crowdfunding

By Andrea Hayley, Epoch Times | April 26, 2016Last Updated: April 27, 2016 10:21 am

Crowdfunding—an online method of soliciting money from the general public for a business, project, or cause—is about to go through a seismic shift. And it could mean insane profits for some investors—profits that were previously unattainable due to government regulations.

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House Bill Would Increase Cap on Equity Crowdfunding

By Gregory Roberts, Bloomberg News

March 24, 2016 — New online crowdfunding Web portals won’t go live until mid-May, but a key House Republican is already renewing efforts to ease existing restrictions on how much money companies can raise via the innovative technique.

Rep. Patrick McHenry (R-N.C.) introduced legislation (H.R. 4855) that would lift to $5 million the amount that an individual venture can raise under the crowdfunding exemption from securities law in the 2012 JOBS Act. That represents a fivefold increase on the $1 million cap now in the law.

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The University of Cambridge and University of Chicago 2015 Americas Alternative Finance Benchmarking Survey

The study is supported by the Inter-American Development Bank (IDB), Business Development Bank of Canada (BDC), KPMG and a number of leading industry research partners

The Cambridge Centre for Alternative Finance at Cambridge Judge Business School and the Polsky Center for Entrepreneurship and Innovation at Chicago Booth School of Business are jointly launching the 2015 Americas Alternative Finance Benchmarking Survey. This survey will be a comprehensive and empirical assessment of crowdfunding, peer-to-peer lending (marketplace lending) and other forms of alternative finance across North, Central and South America and scheduled to be available in April 2016.

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FINRA Guidelines: How to Apply as a New Funding Portal?

January 29, 2016, republished [original content]

FINA has published guidelines for firms to register as funding portals for Title III, Regulation Crowdfunding.

For your firm to become a registered funding portal with FINRA, your firm must complete the following steps.

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FINRA Funding Portal Rules and Related Forms Approved by SEC

January, 29, 2016, republished [original]

Executive Summary

The SEC approved FINRA’s proposed Funding Portal Rules and related forms for SEC-registered funding portals that become FINRA members pursuant to the crowdfunding provisions of Title III of the JOBS Act and the SEC’s Regulation Crowdfunding. FINRA’s Funding Portal Rules will become effective on January 29, 2016, which aligns with the effective date of the SEC’s registration rules under Regulation Crowdfunding. This Notice provides a brief overview of the new Funding Portal Rules and provides information for prospective funding portals that plan to apply for FINRA membership.

The text of the Funding Portal Rules is available on FINRA’s website. The related forms are available for reference in the Appendices. (As discussed further in this Notice, prospective funding portals must file all forms electronically through FINRA’s Firm Gateway. The forms will be accessible on Firm Gateway effective January 29, 2016.)

Questions regarding this Notice should be directed to:

Alissa Robinson, Director, Membership Application Program, at (212) 858-4764; or
Adam Arkel, Associate General Counsel, Office of General Counsel, at (202) 728-6961.
Click here to see more.

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FINRA Extends Review Period of Proposed Funding Portal Rules

As of December 9, 2015, FINRA extended the review period for its proposed funding portal rules to January 26, 2016. The new rules were promulgated pursuant to the Jumpstart Our Business Startups Act 2012 (JOBS Act) which “prohibits funding portals from a variety of activities, including offering investment advice or recommendations, soliciting transactions for securities displayed on their websites, compensating employees for securities solicitations, and holding investor funds or securities.” The proposed rules under review are (i) funding portal rules 100, 110, 200, 300, 800, 900 and 1200; (ii) related forms; and (iii) FINRA Rule 4518 (“Notification to FINRA in Connection with the JOBS Act”).

See: FINRA’s Extension of SEC Review Period.

Title III of the JOBS Act vote is scheduled

October 28, 2015, posted by Kim Wales

Three years after the Securities and Exchange Commission released proposed rules for Title III, Regulation Crowdfunding, news was released yesterday that the Commission will take a vote on whether or not to release the final rules for Title III on Friday, October 30, 2015.

Given the challenges with the 653 pages of proposed final rules, I am hopeful that commission took into account the 300+ recommendation letters, numerous meetings and sideline protest that would amend the final rules into a usable form.

There were many changes requested but the top 3 included:

  1. Increasing the maximum raise from $1 million to $5 million during a 12 month period.
  2. Raise the cap from $500k to $750k before requiring the issuer to provide audited financial statements and to remove the yearly mandate.
  3. Remove the Liability on funding platforms, see page 280.

The meeting at the SEC is open to the public. It is scheduled to take pace at 10:00 AM in the Auditorium Room (L-002). The proceedings are expected to be live-streamed on the SEC web site.

The SEC outlined the meeting:

  1. The Commission will consider whether to adopt rules and forms related to the offer and sale of securities through crowdfunding under Section 4(a)(6) of the Securities Act of 1933, as mandated by Title III of the Jumpstart Our Business Startups Act.
  2. The Commission will consider whether to propose amendments to Securities Act Rule 147 and Rule 504.

 

The SEC Adopts JOBS Act Title IV: Regulation A+

By: Kim Wales (NY) — 03/25/2015

Today marks another milestone in the life cycle of the Jumpstart Our Business Startups Act (JOBS Act) — Regulation A+ is approved. With the three-year anniversary only two weeks away and after many recommendations submitted by myself and fellow colleagues, the Securities and Exchange Commission voted unanimously on the adoption of Title IV: Regulation A+ for small securities offerings.  This is a big step towards furthering the democratization of the capital markets for emerging growth companies.

“These new rules provide an effective, workable path to raising capital that also provides strong investor protections,” said SEC Chair Mary Jo White. “It is important for the Commission to continue to look for ways that our rules can facilitate capital-raising by smaller companies.”

Tier 1 offerings will be subject to federal and state registration and qualification requirements, and issuers may take advantage of the coordinated review program developed by the North American Securities Administrators Association (NASAA).

The rules will be effective 60 days after publication in the Federal Register.

Here are some highlights for the adoption of Regulation A+. Both Tiers are subject to certain basic requirements while Tier 2 offerings are also subject to additional disclosure and ongoing reporting requirements.

1. State Blue Sky preemption and qualification requirements for securities offered or sold to “qualified purchasers” in Tier 2 offerings.

2.  Tier 1 issuers can raise up to $20m rather than the limited $5m maximum in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer.  The coordinated review process by NASAA will only be used for tier 1 offers.

3.  Tier 2 offers and issuers can raise up to $50m in a 12-month period, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer.

3. Regulation A+ offerings are exempt from the mandatory 12(g) registration thresholds – so long as the issuer engages services of a registered transfer agent, remains subject to and current in a tier 2 reporting obligation and meets public float and revenue requirements similar to those in small reporting companies and exchange act rules.  The details of the reporting rules should be included in the final rules.

4. The JOBS Act mandates the Commission to review Tier 2 limits every two years.

5. Issuers raising capital using Regulation A+ may submit draft offers to the SEC staff, use electronic filing process on EDGAR, ability to use test the waters solicitation materials both before and after the filing of the application process.

6. Additional Tier 2 Requirements:

– Financial statements included in the circular will be audited annually.

– Semi and annual outgoing reports and current event updates that are scaled to Regulation A offerings.

– Limit the number of securities, non-accredited investors can purchase, up to 10% of the greater of annual income of net worth natural person; and

– Limit the purchase of 10% of the greater of annual revenue or net assets of unnatural persons.

– Issuers will use Form 8a — short form registration statement concurrently with a qualification Regulation A offering statement to register securities class 12(b) or 12(g) of the total package of investor protections to be included in the implementation of Reg A offer.

“Moving Title IV forward is a positive step in stimulating the economy, however, start-ups will still find it challenging to raise money using Reg. A because the cost and process  remains burdensome for this stage of company, says Kim Wales, founder of Wales Capital.” As an advocate for the JOBS Act and policy reform, “we still need to get the rules released for Title III and raise the limits up to $5 million and exclude investment limits for accredited investors” as prescribed in my recommendation letter “Limitation of Capital Raised,” February 23, 2014. “This is the part of the JOBS Act that will help all people.”

JOBS Act: SEC Proposes Revising Section 12(g) for Titles V and VI

By: Kim Wales (NY) — 12/18/2014

The Securities and Exchange Commission released proposed rules that would implement Title V and VI of the Jumpstart Our Business Startup Act. The Commission proposes amendments that would revise the rules adopted under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) to reflect the new, higher thresholds for registration, termination of registration and suspension of reporting that were set forth in the JOBS Act. The proposed rules would also apply the thresholds specified for banks and bank holding companies.

What’s next: Public Comment Period (comments should be received on or before February 18, 2015).

Read the full proposal here:

SEC 12g

 

 

 

 

SEC 33rd Small Business Forum on Capital Formation Recap

By: Kim Wales, 11/26/2014 —

The 2014 Securities and Exchange Commission Government-Business Forum on Small Business Capital Formation ensued on November 20, 2014 at the SEC headquarters in Washington, D.C.

In usual form, since the signing of the Jumpstart Our Business Startups Act (JOBS Act), the crowd (attorney’s, issuers, intermediaries, regulators, investors, service providers and) scurry to wait with baited breathe to hear the status of the pending rules for Titles III (Crowdfunding) and Title IV (Regulation A+). Remaining true to form the Commission did not provide any dates on when the final rules will go live for either.

The Forum is known to advance some recommendations in the past that has influenced the health of the capital markets; though it seems like no movement has been made on the recommendations that came from the 2013 Forum, specifically focusing on Title III, as I was a panelist presenting on for the “Panel Discussion: Crystal Ball: Now that you raised money, what’s next for the company and the markets?” Waiting patiently over the webcast or in person we were sure that the Thirty-Third forum would not disappoint.

What resonated from each Commissioner and more specifically from Commissioner Gallagher in his introduction was hope that day’s discussion would “embrace the full scope of the public and the private markets in small business securities which encompasses a fully robust capital market ecosystem for small businesses which requires both.”

Further, he continued –“There is a need for continued innovation in secondary trading in the private marketplace. If additional guidance from the SEC—for example, with respect to a private resale exemption—would help the market to develop further, we should move forward on that now.”

3 Key Points from the Commissioner’s Opening Remarks

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Article Revised 11/27/2014