SEC and FINRA Released Proposed Final Rules for Title III
Today, October 23, 2013 marks an exciting day for the alternative class of issues for Crowdfund Investments.
The Securities and Exchange Commission (SEC), unanimously voted during an impromptu scheduled Sunshine Meeting to release the Proposed Final Rules for Title III of the Jumpstart Our Business Startup Act (JOBS Act). It was noted that FINRA would also released Proposed Rules for Funding Portals and Form FP-NMA for public comment. This move is in the right direction to begin putting in place mechanisms that create jobs and spur on capital formation for small emerging business as the JOBS Act was intended, given that unemployment nationally remains high at 7.2%. The proposal as outlined in the meeting included very similar rules to that which is currently in Draft Proposal.
In addition to ensuring the investor protections are in place for the crowd; the rules provide for methods in which the issuers and intermediaries will be able to conduct business.
It was noted that investors should be protected and have confidence that the market being created knows how to price the securities while being diligent in helping to prevent against fraudulent activities. Capital formation is a global process and when approached objectively, capital formation enhances confidence, promotes integrity and fosters market transparency. The criticality of each business owner, investor and intermediary to read and comment on the proposed rules will set the foundation for the development of this burgeoning Crowdfund Investing industry.
Along with investor protections being at the forefront in all comments, Commissioner Stein called for specific comments in three areas:
1. How much should an investor be able to invest? Which method should be used to determine such an answer, Income versus NET worth test?
2. Should non-US based Funding Portals be permitted to conduct business in the USA by registering with the SEC and FINRA?
3. What should Issuers responsibility be for tracking securities holder’s records? Specifically, what role could third party service providers offer to manage record holder information.
What should the public expect in the coming days?
1. The SEC will issue proposed rules for public comment along with 295 questions that have to be addressed by the public through the letter writing process.
2. FINRA will issue proposed rules for public comment as related to Intermediaries.
Note that the public comment period in each instance for FINRA and the SEC should be 90 days from the day the Final Proposed Rules are listed in the Federal Register in the case of the SEC.
For more information on the JOBS Act, Title I through VII, please contact Wales Capital, 212-736-6884, firstname.lastname@example.org.