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The FCA Publishes UK Equity Crowdfunding Review

By: Kim Wales (NY) — 02/03/2015

The Financial Conduct Authority publishes its crowdfunding review. Turbulence in the markets spawned a new industry for capital markets in 2012 called Equity crowdfunding, which as of now has transacted £67m of equity investment in the United Kingdom, according to statistics from AltFi, a data provider. TrillionFund, Crowdcube, Seedrs and SyndicateRoom represents the largest platforms that are etching their footprint in the landscape, as such 35 smaller start-up platforms are following their path and up to 10 of those are in the process of being evaluated for licenses. Early on the Financial Conduct Authority recognized the vital importance of facilitating capital formation in markets that were effectively broken or inefficient.

Unlike sites such as Kickstarter, where donors contribute money to projects often in exchange for token “rewards”, equity crowdfunding allows investors to buy shares in the companies. This can be a little more risky than another blossoming area, peer-to-peer lending which shortens the time line for the lenders to receive a return on investment given the nature of the risk profiles of the borrowers. A study last year indicated that some 62 per cent of funders on equity crowdfunding sites have no experience of early-stage investment which heightens the regulators caution towards investor protection rules.

“A light touch approach” was the thesis behind the initially published rules in March 2014 and was broadly embraced by most industry participants. In stark contrast to the United States, the FCA made a conscious decision to allow the nascent industry to grow and evolve without unbearable rules. The FCA affirmed, “they see no need to alter course” as things as the marketplace is evolving. This publication provides a complete high level overview to the UK market with the expectation being that a more complete review will be conducted in 2016.

The FCA is keen to promote innovative financial technology as well as individual investing in the stock markets, and is understood not to want to kill off the fledgling sector. However, the FCA has warned investors “it is very likely you will lose all your money” in equity crowdfunding, which involves taking stakes in unlisted companies that are often in their early stages.

Some companies failed to meet capital requirements last year, while others made misleading claims that they were placing retail investors on an equal footing with venture capitalists, the FCA said.

“This becomes significant if venture capitalists are able to profit from successful investment opportunities but crowdfunding investors find, when an investment succeeds, that equity dilution means they do not share in the profits to the same extent,” said the FCA.

To read the published review click here.

Financial Conduct Authority Review of Crowdfunding Rules

Financial Conduct Authority Review of Crowdfunding Rules

The State of Equity Based Crowdfunding

Washington, D.C.,

August 24, 2014, 700+ days after the JOBS Act was signed into legislation, the SEC still has not released the final rules for Title III: Regulation Crowdfunding.

Over one year ago, February 19, 2013, the nation’s principal leaders and experts on equity and debt‐based financing providing an in‐depth review of the extensive build out and preparation that has taken place to help entrepreneurs’ access capital through online platforms, while protecting the investors who will finance these enterprises. The group touched upon the global advancement of equity‐based crowdfunding, the significant challenges entrepreneurs still face in accessing capital and why it is vitally important that the SEC finalize JOBS Act rule makings.

Watch the Press Conference:

 

Moderator and Host: Karen Kerrigan, President & CEO, SBE Council; Panel of Experts: Sherwood Neiss & Jason Best, architects of the crowdfund investing framework that became law through the JOBS Act and Principals of Crowdfund Capital Advisors; Candace Klein, Founder, Bad Girl Ventures and SoMoLend; Ryan Feit, Co‐Founder, SeedInvest; Vince Molinari, President, GATE Technologies; Sara Hanks, CEO, CrowdCheck; Chris Tyrell, Nehemiah Investments; Kim Wales, Founder of Wales Capital and Chair of the Crowdfunding Professional Association [introduced at 25 minute mark]; Judy Robinett, Entrepreneur, Advisor to Early Stage Companies; Doug Ellenoff, Ellenoff, Grossman & Schole, LLP; Chance Barnett, Founder, Crowdfunder

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, info@walescapital.com.

National Minority Angel Network – Capital Formation

On, Thursday, September 26, 2013, the National Minority Angel Network (NMAN), in conjunction with Microsoft will host an event on the JOBS Act and Capital Formation with an expert Panel of Speakers, http://www.nmanetwork.com/nyc-meet-our-panelist/, David Wield, former Vice Chair NASDAQ/Co-Author JOBS ACT/ Chair & CEO Weild & Company, Kim Wales, Entrepreneur/Visionary/Crowdfunding Expert/ CEO. Wales Capital, Doug Ellenoff, Esq. – Strategy/Transactions/Corp. Financing/Member, Ellenoff Grossman & Schole, LLP, Daryl Bryant – Successful Serial Entrepreneur/CEO, StartupValley and Hudson Horizons, Ryan Feit – Entrepreneur/Investor/CEO & Co-Founder, SeedInvest, and Mike Norman, CEO & President, WeFunder.

Small business capital is vital to our economy. With the passage of the JOBS Act for Crowdfunding, a whole new era of capital is available to small business owners of every industry and sector. Under the revisions of the Securities Act of 1933, Crowdfunding allows business owners and entrepreneurs to access the public market to fund their business from several thousand dollars up to one million dollars. But not all forms of Crowdfunding are currently legal, most businesses use pledge or donation based models to raise capital which is legal. However, if you choose to sell securities (stock or units) or raise debt then you need to know the law for Title III funding. Title III funding will increase the amount of funding and number of investors from the current amount. Title III funding  can become one of the most important sources of financing in the 21st Century for minority and woman entrepreneurs who together only represent above 1% and 4% respectively of all Angel based investments in the US. This session will provide you with an understanding of all three forms of funding, how to prepare for raising capital, meet some of the leading authorities in Crowdfunding, and businesses who successfully raised capital from Crowdfunding portals.

Click to purchase your ticket(s).

Feliciano Center for Entrepreneurship – Crowdfunding

On Friday, September 20, 2013,  the Feliciano Center for Entrepreneurship will host an event with expert panelist on Crowdfunding – Latest Insight on Implementation of the JOBS Act – which will include crowdfunding laws and discussions will cover the series of regulatory changes happening this fall intended to make it easier for early-stage companies to raise capital.

The Feliciano Center for Entrepreneurship was created to enhance entrepreneurship education at Montclair State University by creating an environment where students unleash their talent for creativity, innovation and entrepreneurial drive.  This environment will provide students the opportunity to create and develop ideas that turn into real products or services and ultimately pitch those products and services to successful entrepreneurs.  Students will become entrepreneurs.

Speakers scheduled are: Zak Cassady-Dorion, partner, Crowdfund Capital Advisors; Kim Wales, founder of www.Wales Capital.com, in Manhattan, and board member of Crowdfunding Intermediary Regulatory Advocates; Jonathan Sandlund, founder of www.thecrowdcafe.com; Douglas Ellenoff, member Ellenoff Grossman & Schole, a law firm with offices in Manhattan; and Daryl Bryant, founder of Startup Valley.

CF50 — Global Think Tank for Crowdfunding Leadership

NEW YORK, NY–(Marketwired – July 11, 2013) –  As crowdfunding becomes a viable capital-raising tool for startups worldwide, fifty leaders in the crowdfunding industry are uniting to create a think tank for the advancement of a global crowdfunding ecosystem. CF50 is a global nonprofit invite-only membership organization consisting of industry professionals, portal CEOs, academics, and policy makers who will carefully deliberate the direction crowdfunding takes as it becomes an internationally widespread practice. The recent lifting of the ban on general solicitation by the U.S. highlights the recent movements towards the democratization of capital formation.

The organization will convene at an annual global conference in which leaders are able to discuss highlighted issues and the future of crowdfunding. CF50 announced today that its leadership will consist of:  Read more:

SEC Adopts General Solicitation and Advertising in Certain Private Offerings

July 10, 2013

The SEC adopts Title II 506(c) – general solicitation and advertising of the JOBS Act, which removes the uncertainty about the forward progress from Chairwoman Mary Jo White.  As for her priorities at the agency, White said during her March confirmation hearing that her top priority would be to finish rulemaking mandates under the Dodd-Frank and JOBS Act “in as timely and smart a way as possible.”

“Given the explicit language f the JOBS Act as week as the statutory deadline which passed last July, the Commission should act without further delay,” White said before  today’s vote on Title II for general solicitation and advertising.  “This does not mean, however, that the Commission should not take steps to pursue additional investor safeguards if and where such measures become needed.

Wales Capital Summary: JOBS Act TItle II – Adoption

SEC’s Final Rules: http://www.sec.gov/rules/proposed/2013/33-9416.pdf

 

 

 

Crowdfunding Champions of Change Ceremony

Washington, DC (PRWEB) June 03, 2013

 

The White House hosted Kim Wales, Founder of Wales Capital and Board Member of the Crowdfund Intermediary Regulatory Advocates (CFIRA) along with other distinguished crowdfunding industry thought leaders for the Champion of Change Ceremony on June 4th recognizing entrepreneurs using crowdfunding to fuel growth.

» Full news story

Next Generation Funding: $50K – $5MM

Oxford Valuation Partners, Crowd Valley and KPMG featured experts, Kim Wales, founder of Wales Capital, Douglas Ellenoff, senior attorney with the firm Ellenoff, Grossman & Schole, Nicolas Hodge, Partner at K&L Gates, Alejandro Cremades, founder of RockThePost, Vamsi Sistla, CTO of CrowdValley and an Angel Investor with the ARC Angel Fund and Daniel Miller, Co-Founder of Fundrise, who are at the cutting edge of this new field, Crowdfund investments. Together they discussed and debated the landscape of funding options and how quickly it changing. Driven by new SEC no-action letters and changes stemming from the JOBS Act that is permitting a broader scope of activity in the space outside of the traditional networks.  The current focus seems to be on platforms that link Accredited Investors and investment opportunities, while more retail options are being developed since the final rulemaking process for Title III remains underway.

http://crowdfunding-university-baruch-newyork-57.eventbrite.com/

SEC’s White Said to Push for Lifting Ban on Hedge-Fund Ads

White, who became SEC chairman on April 10, 2013, has suggested the commission pass the existing plan without major changes and add additional protections later, said the people, who declined to be identified because the deliberations are private. The approach would placate congressional Republicans who have complained the SEC has slow-walked the rule, which was required to be completed by July 2012.

http://mobile.bloomberg.com/news/2013-04-26/sec-s-white-said-to-push-to-lift-ban-on-hedge-fund-advertising.html

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