The Securities and Exchange Commission proposed meaningful changes to a number of securities exemptions to facilitate easier capital raising for small issuers. As we shared in our previous post on Q1 2020 update, under these proposals, the capital raising limit for equity crowdfunding would be increased to $5 million, dramatically increasing the number of issuers who will find it appealing to raise capital through one of the regulated crowdfunding portals. Doug Ellenoff, LawCloud’s Chairman, was active in promoting these changes and spoke in front of the Congressional Committee on Financial Services last Fall about these issues.
LawCloud believes that this exciting news and the anticipated surge of issuers relying on Reg CF and Reg A+ exemptions will result in heightened SEC scrutiny of disclosure filings within these spaces where non-compliance is currently commonplace. Some issuers file their Form C with minimal risk disclosures or insufficient information for investors to make educated decisions. Many issuers do not file Form C-U when their offering is completed and the lack of annual reporting is rampant for a filing that is critical for investors to remain up to date on the fundamentals of the company in which they have invested. The lack of compliance of Reg CF issuers has caught the attention of some state’s Attorney Generals as well. LawCloud remains the go-to platform for compliance as well as low costs for Reg CF issuers with its suite of products, which include Form C and annual report filing tools which are due at the end of April.
At FundWisdom we see the other side of this in the data we collect on the industry. We see misspellings or other mistakes in filing forms that we pull together directly from the SEC filing database. We are not legal experts so definitely suggest consulting with one before raising money or it couldn't hurt to check in for review of investing docs. We have partnered with LawCloud and several other firms to offer legal services.
LawCloud is building out an array of offerings in the startup market not just in regulation crowdfunding. They recently released a Regulation A+ tool to assist law firms and issuers with producing draft documents at a tremendous savings versus the traditional path of using a law firm without technology. When we first started Fund Wisdom we leveraged local University legal centers for low, to no, cost help whereas if we knew of these offerings we would have leveraged them due to the deep expertise the team has built in the space.
For a complete overview of the proposed changes, please see the article from Crowdfund Insider.