Equity Funding Legal News https://fundwisdom.com/ en SEC Proposals Likely to Increase Scrutiny of Reg CF Issuers https://fundwisdom.com/article/brian-thopsey/sec-proposals-likely-increase-scrutiny-reg-cf-issuers <span property="schema:name">SEC Proposals Likely to Increase Scrutiny of Reg CF Issuers</span> <div property="schema:text" class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>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 <a href="/article/brian-thopsey/2020-q1-equity-crowdfunding-numbers">previous post on Q1 2020 update</a>, under these proposals, <strong>the capital raising limit for equity crowdfunding would be increased to $5 million</strong>, 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.</p> <p><a href="https://www.lawcloud.co/"><img alt="Law Cloud logo" src="/sites/fundwisdom.com/files/styles/medium/public/2020-04/lawcloud.jpg" class="autofloat-odd " /></a><br /> LawCloud believes that this exciting news and the anticipated surge of issuers relying on Reg CF and Reg A+ exemptions <strong>will result in heightened SEC scrutiny of disclosure filings within these spaces where non-compliance is currently commonplace</strong>.  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.</p> <p>At FundWisdom we see the other side of this in the <a href="/analytics">data we collect on the industry</a>. 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 <a href="/investors/services/top-legal-tax-equity-crowdfunding">LawCloud and several other firms to offer legal services</a>.</p> <p>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.</p> <p>For a complete overview of the proposed changes, please see the article from <a data-saferedirecturl="https://www.google.com/url?q=https://www.crowdfundinsider.com/2020/03/158321-sec-proposes-raising-reg-cf-to-5-million-reg-a-to-75-million-adds-other-improvements-to-security-exemptions/&amp;source=gmail&amp;ust=1587464725660000&amp;usg=AFQjCNFThmEFSYqvANtNrR-LwyqEsl-z7A" href="https://www.crowdfundinsider.com/2020/03/158321-sec-proposes-raising-reg-cf-to-5-million-reg-a-to-75-million-adds-other-improvements-to-security-exemptions/" style="color:rgb(0,124,137)" target="_blank">Crowdfund Insider</a>. </p> </div> <span rel="schema:author"><a title="View user profile." href="/users/brian-thopsey" lang="" about="/users/brian-thopsey" typeof="schema:Person" property="schema:name" datatype="">Brian Thopsey</a></span> <span property="schema:dateCreated" content="2020-04-20T10:39:57+00:00">Mon, 04/20/2020 - 06:39</span> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div property="schema:about" class="field__item"><a href="/tags/legal" hreflang="en">Legal</a></div> </div> <div id="comment-section"> <div class="title-line"></div> <div id="comment-container"> <div> </div> </div> <div class="cleared"></div> </div> <div id="comment-form" class="content"> <div id="respond" class="comment-respond"> <h3 id="reply-title" class="comment-reply-title"><span class="title_reply_label">Leave Your Comment</span><span class="title-line"></span> </h3> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&amp;1=9906&amp;2=comment&amp;3=comment" token="Gfbrf-lIxrKcll9HBfq4ytNPusSpPXNCOh60SUExwEY"></drupal-render-placeholder> </div> <!-- #respond --> <div class="cleared"></div> </div> <div class="cleared"></div> Mon, 20 Apr 2020 10:39:57 +0000 Brian Thopsey 9906 at https://fundwisdom.com Equity Funding Portals Risks and Rewards https://fundwisdom.com/article/brian-thopsey/equity-funding-portals-risks-and-rewards <span property="schema:name">Equity Funding Portals Risks and Rewards</span> <div property="schema:text" class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>This is an update to an article originally published by Naomi Garlick in 2015.</p> <p>Equity crowdfunding started as an exciting development for opening access to invest in high growth startup companies with the potential for large returns. With the large returns come equal high risks. Risks are shared between the investors as well as the entrepreneurs. Small businesses now have an additional source of capital through the creation of <a href="/investors/platforms">online portals</a>, but challenges arise with selecting the right one. Investors continue to face the same risk of any venture investment with the high chance of total failure and losing everything. Services have been created to address each of these which we review in detail.<br />  </p> <p><img alt="Equity CrowdFunding Tag Cloud, startups, investors" src="/sites/all/files/cfund//crowdfunding_cloud_0.png" class="autofloat-odd " /></p> <h2>Overall Crowdfunding</h2> <p>Individuals can raise money through crowdfunding within several categories, the two most popular are donation and rewards based crowdfunding. Equity-based crowdfunding is lesser known but poses the greatest potential return to the investor. Donation and rewards based funding facilitate money movement from anyone, no matter who they are or how much money they make. However with equity-based crowdfunding, only accredited investors are allowed to invest in most equity offerings. <a href="/crowdfunding-investors/crowdfunding-investor-types">Accredited investors</a> are wealthy, or high net-worth, individuals who the Securities and Exchange Commission (SEC) deem capable to invest.</p> <h3>Equity Funding Portal Growth</h3> <p>Today anyone is able to invest a percentage of their income in exchange for a stake in the company. Equity Crowdfunding provides an opportunity for startups to raise capital while gaining insightful advisors. The portals help facilitate the startup's equity offerings to broader groups of investors. The Jumpstart Our Business (JOBS) Act, Title III was built to "bring Wall Street to Main Street" by allowing individuals to invest in private companies in exchange for equity. The law was believed to democratize the capital markets by creating a populist investing pool, but limitations in the US resulted in this dream falling short <a href="/article/brian-thopsey/global-equity-crowdfunding-platforms">compared to other countries</a>.</p> <p>Since the JOBS Act have been passed allowing for general solicitation of qualified offerings, Equity Crowdfunding has experienced growth, but not to the extent some believed, including myself. When compared with rewards-based or donation-based, equity-based Crowdfunding raises the most funds per project.</p> <p>President Barack Obama signed the JOBS Act into law in April 2012, and in 2016 title III was implemented. It has driven <a href="/investors/innovative-venture-reports/university-cambridge">$260.9 million in funding</a> in the Americas to help get startup companies off the ground by end of 2017. This is based on data from the University of Cambridge’s Center for Alternate Finance. <a href="https://pitchbook.com/media/press-releases/us-venture-capital-investment-reached-1309-billion-in-2018-surpassing-dot-com-era"> According to research from PitchBook</a>, in 2018 US Venture Capital reached $130.9 billion, and <a href="https://pitchbook.com/media/press-releases/record-unicorn-financings-drove-2017-total-venture-capital-investments-to-84-billion-the-largest-amount-since-dot-com-era">2017 was $84 billion</a>. That results in the Americas equity crowdfunding only totaling 0.3 percent of the overall venture funding space.</p> <h2>Rewards</h2> <p>The most obvious reward of using equity funding portals would be the greater access to capital it provides entrepreneurs and greater access to investors. AOL co-founder Steve Case recently sat down with Fox News and shared some of his thoughts on the future for entrepreneurs and the equity crowdfunding phenomenon. <a>Case told Fox News</a> that "we're beginning to see the benefits of crowdfunding as a means of leveling the playing field, so anybody with any idea, irrespective of where they are, have more of a shot. The seed capital to get started will increasingly come from these crowdfunding platforms, and then as entrepreneurs achieve some momentum, they can more readily connect with institutional investors to get expansion capital."</p> <h2>Risks</h2> <p>Risks regarding Equity Crowdfunding platforms will always exist. Many Equity Crowdfunding platforms themselves perform their own due diligence officiating those that list on their sites. Entrepreneurs can list their equity offering on the platform and, in exchange, the platform receives compensation either in up front fees or fees structured to the deal itself. When posting an equity offering, the entrepreneur must determine that both the platform and the investors are legitimate. Likewise when investing in an equity offering, the accredited investor must determine that both the startup company and the platform are legitimate. </p> <p>Online investment platforms have regulatory obligations to perform due diligence on the companies they allow to raise money.  This process to review the firms requesting access to capital can shield the portals from potential liabilities. </p> <h3>Risk Reduction Offerings</h3> <p>We at Fund Wisdom review platforms prior to adding them on our database while also partnering with a number of services to address these risks.</p> <p><a href="http://www.crowdcheck.com/" target="_blank">CrowdCheck</a> is a due diligence and disclosure company for online offerings providing transparency and investor protection to platforms, investors and entrepreneurs. Sara Hanks, Founder and CEO of the firm recently shared with us, "We help to make sure the investor has the tools to make an informed investment decision. We thus protect the issuer, the investor and the intermediary."</p> <p>At Fund Wisdom we review platforms prior to working with them. We have chosen not to work with a few platforms due to their standards of vetting. We have chosen to not include Angel Investment Network, a UK-based platform that states they have "the largest database of investors worldwide" with "3,500 angel investors from the US and the remaining amount are spread across 22 other countries." This is due to the quality of offerings and compensation structure. Entrepreneurs report that upon creating a company profile they receive an email notification from AIN that a number of investors were interested in their equity offering. However, in order to be further connected with these investors, the entrepreneur must pay $99 to the platform, known as a "pay-to-pitch" policy. </p> <h3>For Entrepreneurs</h3> <p>Entrepreneurs must either rely upon services or perform their own due diligence on both the investing portals and individual investors before signing any legal agreements. Bill Southworth, CEO of the renewable energy startup company Elecyr, used EquityNet for one of his earliest funding rounds. He has reported that one of the investors had gone so far as to steal the identity of a genuine angel investor. Once Southworth made this discovery he immediately took down his listing on EquityNet. <a href="http://thefunded.com/" target="_blank">The Funded</a> the "Yelp of Venture Capital" was created to allow portfolio companies to rate their investors.</p> <h3>Regulatory</h3> <p>Since online financing platforms provide limited information about the people involved in an investment deal, government agencies like the SEC, and FINRA, along with other service providers are working to eliminate these risks from the Crowdfunding world by providing transparency and security to both investors and entrepreneurs.</p> <h2>Conclusion</h2> <p>Online investing via Equity Crowdfunding is an exciting opportunity for both businesses and investors. While investors and entrepreneurs need to be aware of the risks involved in this new market, this form of financing creates the potential for huge rewards. It has and will continue to create opportunities for individuals to participate in a team of passionate and hardworking entrepreneurs. Equity Crowdfunding spurs economic expansion and job creation.</p> <p>If you have any service providers or stories to share we are interested to hear. Please feel free to share in the comments below or <a href="/contact/">contact us</a>.</p> </div> <span rel="schema:author"><a title="View user profile." href="/users/brian-thopsey" lang="" about="/users/brian-thopsey" typeof="schema:Person" property="schema:name" datatype="">Brian Thopsey</a></span> <span property="schema:dateCreated" content="2019-10-03T21:45:37+00:00">Thu, 10/03/2019 - 17:45</span> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div property="schema:about" class="field__item"><a href="/tags/legal" hreflang="en">Legal</a></div> </div> <div id="comment-section"> <div class="title-line"></div> <div id="comment-container"> <div> </div> </div> <div class="cleared"></div> </div> <div id="comment-form" class="content"> <div id="respond" class="comment-respond"> <h3 id="reply-title" class="comment-reply-title"><span class="title_reply_label">Leave Your Comment</span><span class="title-line"></span> </h3> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&amp;1=352&amp;2=comment&amp;3=comment" token="StziL-ugXZ6gdYTeA_5J8WuVZDKM3k8UNqyCDO41UsY"></drupal-render-placeholder> </div> <!-- #respond --> <div class="cleared"></div> </div> <div class="cleared"></div> Thu, 03 Oct 2019 21:45:37 +0000 Brian Thopsey 352 at https://fundwisdom.com https://fundwisdom.com/article/brian-thopsey/equity-funding-portals-risks-and-rewards#comments https://fundwisdom.com/article/brian-thopsey/equity-funding-portals-risks-and-rewards#comments Non-Accredited Investors Capitalize on Access to Private Equity https://fundwisdom.com/article/brian-thopsey/non-accredited-investors-capitalize-access-private-equity <span property="schema:name">Non-Accredited Investors Capitalize on Access to Private Equity</span> <div property="schema:text" class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>At Fund Wisdom, <a href="/about">we believe innovative wealth-building investments</a> should be accessed by all, and we look to empower the democratization of private equity. Overarching returns for alternative assets like private equity have outperformed the stock market through the <a href="/article/brian-thopsey/equity-crowdfunding-risks-and-rewards">greater risk profile</a>. Below we showcase investment opportunities in early-stage companies with the goal to help you produce higher returns, lower fees, and reduced risk. Review our curated list of <a href="/investors/platforms">leading-edge alternative investment platforms</a> and <a href="/investors/companies">companies listing</a> across each platform and let us know about your experience.</p> <h2>Accredited Hurdle</h2> <p>In the United States, you must be wealthy in order to invest in most startup offerings. This is where the term "private" in private equity comes from. The measure of wealth is defined by the Securities and Exchange Commission (SEC) as a net worth of $1 million excluding a primary residence.  Their other measure of wealth <meta charset="utf-8" />is an annual income of $200,000 for the past two years (if single, for married couples it’s $300,000). <meta charset="utf-8" /> If you hit one of these thresholds you would qualify as an accredited investor. More detail on accredited investors can be found on our <a href="/investors/non-accredited-unaccredited-investors">Investor Type section</a>.</p> <p><meta charset="utf-8" />Several regulatory and market changes allow for greater access to these historically private offerings. As alternative assets become increasingly democratized, non-accredited investors can capitalize on access to private equity. The Jumpstart Our Business Start-ups <a href="/about/jobs-act-title-iii">(JOBS) Act’s Title III and IV</a> requirements enable non-accredited investors to purchase shares in private companies through<a href="/investors/platforms"> equity funding portals</a>.</p> <p>These laws were drafted with access in mind, but have been implemented with too many restrictive limitations. <meta charset="utf-8" />Major market innovations like blockchain and cryptocurrencies have filled the resulting gaps.</p> <h2>Venture Investing for All</h2> <p><img alt="Jobs Act" data-entity-type="file" data-entity-uuid="8de8b32f-4ab6-4fce-8580-a2d7c396982d" src="/sites/fundwisdom.com/files/inline-images/barack-obama.PNG" style="width: 300px; margin: 10px;float:right;" class="autofloat-odd " /></p> <p>Non-accredited offerings must adhere to SEC legislation including Regulation D which restricts private securities deals. Below are the different options founders can chose from in structuring their offering:<b> </b></p> <ul dir="ltr"><li>506b private placement <ul><li><b id="docs-internal-guid-8ffc9d9a-7fff-5024-0d35-980688b25f5e" style="font-weight:normal;"><span style="font-size:11pt;font-family:Arial;color:#000000;background-color:transparent;font-weight:400;font-style:normal;font-variant:normal;text-decoration:none;vertical-align:baseline;white-space:pre;white-space:pre-wrap;">forbidden from advertising (</span></b>no general solicitation)</li> <li>cap at a maximum of 35 non-accredited investors</li> </ul></li> <li>506c <ul><li>allows for advertising, (general solicitation)</li> <li>no non-accredited investors</li> </ul></li> <li>504 <ul><li>advertising (general solicitation) allowed if restricting to accredited investors only</li> <li>caps at $5 mil in 12 months</li> </ul></li> <li>505 <ul><li>5 mil cap 12 month</li> <li>35 non accredited ok but phased out and made part of 504</li> </ul></li> </ul><p>SEC regulation states that if non-accredited investors have an annual income/net worth less than $100,000, they retain the ability to invest over $2,000 or 5 percent of lesser their annual income/net worth. Yet if investors receive over $100,000, they can invest 10 percent of lesser of their annual income/net worth.</p> <p>It’s clear that the barriers to entry are decreasing, providing access to less-affluent individual investors. An assortment of <a href="/investors/platforms">online platforms</a> <meta charset="utf-8" />have been developed to attract investors that cannot hit the requisites for accreditation. These platforms provide end-to-end digital solutions, offer an array of alternative investments across the liquidity sphere, and leverage relationships with sophisticated institutions such as sovereign wealth funds, pension funds, insurance companies, and endowments. They also offer investors exposure to private funds that lower minimum investments. These platforms can seamlessly incorporate with <a href="/investors/portfolio-system">client portfolios</a> and help qualified registered investment advisors collate smaller pools of money.</p> <h2>Conclusion</h2> <p dir="ltr" id="docs-internal-guid-362969f5-7fff-0a6a-84aa-5bc967e14f85"><meta charset="utf-8" /><meta charset="utf-8" />The proliferation of financial technology is contributing to the extinction of inefficient marketing practices, excessive distribution pricing, and archaic information delivery. Non-accredited investors can efficiently and cost-effectively access curated leading-edge alternative <a href="/investors/platforms">investment liquidity</a>. There are a lot of online platforms, and at Fund Wisdom we’ll help you take advantage of this paradigm shift. If you decide to participate in the market let us know in the comments below or <a href="/contact/">reach out</a> as we look to share experiences whether they are good or bad.</p> </div> <span rel="schema:author"><a title="View user profile." href="/users/brian-thopsey" lang="" about="/users/brian-thopsey" typeof="schema:Person" property="schema:name" datatype="">Brian Thopsey</a></span> <span property="schema:dateCreated" content="2019-03-24T15:15:01+00:00">Sun, 03/24/2019 - 11:15</span> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div property="schema:about" class="field__item"><a href="/tags/capital-types" hreflang="en">Capital Types</a>, <a href="/tags/retail-investors" hreflang="en">Retail Investors</a>, <a href="/tags/legal" hreflang="en">Legal</a>, <a href="/tags/platforms" hreflang="en">Platforms</a></div> </div> <div id="comment-section"> <div class="title-line"></div> <div id="comment-container"> <div> </div> </div> <div class="cleared"></div> </div> <div id="comment-form" class="content"> <div id="respond" class="comment-respond"> <h3 id="reply-title" class="comment-reply-title"><span class="title_reply_label">Leave Your Comment</span><span class="title-line"></span> </h3> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&amp;1=6772&amp;2=comment&amp;3=comment" token="eBPbB1URxgWZ08XETLzBOR7WVKIngf32mRaYNCGZV6g"></drupal-render-placeholder> </div> <!-- #respond --> <div class="cleared"></div> </div> <div class="cleared"></div> Sun, 24 Mar 2019 15:15:01 +0000 Brian Thopsey 6772 at https://fundwisdom.com https://fundwisdom.com/article/brian-thopsey/non-accredited-investors-capitalize-access-private-equity#comments https://fundwisdom.com/article/brian-thopsey/non-accredited-investors-capitalize-access-private-equity#comments Crowdfunding Rules-Regulaiton A+ https://fundwisdom.com/article/jingjing/crowdfunding-rules-regulaiton <span property="schema:name">Crowdfunding Rules-Regulaiton A+</span> <div property="schema:text" class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p dir="ltr"><span style="font-size: 13.0080003738403px; line-height: 1.538em;">Regulation A+ will have little impact leaving most entrepreneurs waiting for additional laws to be passed. The JOBS Act Title II passing in April 2012 <a href="/analytics/online-equity-investment-report">inspired the online investing in startups</a>, but limited this market to accredited investors. <a href="/article/brian-thopsey/title-iii-equity-crowdfunding-update-nonaccredited-investors">Title III</a> was expected to allow the reamining 95% of the population to invest, but has been delay to the beginning of 2016. </span></p> <p dir="ltr"><span style="font-size: 13.0080003738403px; line-height: 1.538em;">Regulation A+ rules was released by SEC on March 25, 2015, to help growth companies raise funds from non-accredited investors in a mini-IPO style.  Regulation A+ would go into effect 60 days after publication(June 2015).</span> Regulation A+ has different rules for Tier I and Tier II.  Tier I is for the companies raising up to $20 million, while Tier II is $1 to $50 million.</p> <h2>Highlights of Regulation A+</h2> <ol><li><span style="font-size: 13.0080003738403px; line-height: 1.538em;"><strong>High Maximum Raise:</strong> Issuers can raise up to $20,000,000 for Tier 1 and $50,000,000 in a 12 month period for Tier 2.</span></li> <li><span style="font-size: 13.0080003738403px; line-height: 1.538em;"><strong>Anyone can invest: i</strong>ncluding non-accredited investors. For Tier 2 investors, however, they will have some limits.</span></li> <li><span style="font-size: 13.0080003738403px; line-height: 1.538em;"><strong>Investment Limits:</strong> For Tier II, individual investors can invest a maximum of the greater of 10% of their net worth or 10% of their net income in a Reg A+ offering (per offering). There is no limits for Tier I investors.</span></li> <li><span style="font-size: 13.0080003738403px; line-height: 1.538em;"><strong>Self-Certification of Income: I</strong>nvestors can self-certify their income or net wealth and don't need documents to prove their wealth.</span></li> <li><span style="font-size: 13.0080003738403px; line-height: 1.538em;"><strong>You can advertise your offering:</strong> General soliciation or advertise the offering is permitted.</span></li> <li><span style="font-size: 13.0080003738403px; line-height: 1.538em;"><strong>Offering Circular Approval Required: </strong>the issuers need to file a disclosure document and audited financials with the SEC.</span></li> <li><span style="font-size: 13.0080003738403px; line-height: 1.538em;"><strong>Audited Financials Required:</strong> For Tier II, The issuers will be required to provide two-year audited financial statement beside Offering Circular. Tier I only need to offer reviewed financials(not audited).</span></li> <li><span style="font-size: 13.0080003738403px; line-height: 1.538em;"><strong>Ongoing Disclosure Requirements:</strong> For Tier 2, the issuer will be required to make an annual disclosure filing, a semi-annual report, and current reports. These reports will also require ongoing audited financials.There are no ongoing disclosure requirements for Tier 1.</span></li> </ol><h2>Comments on Regulation A+</h2> <p dir="ltr">In order to eliminate confusions about Regulation A+, we have reached out to Anthony J. Zeoli, an experienced small business <a href="https://www.linkedin.com/vsearch/p?title=Senior+Attorney&amp;trk=prof-exp-title">Senior Attorney</a> practicing in Chicago at <a href="https://www.linkedin.com/company/358572?trk=prof-exp-company-name">Ginsberg Jacobs LLC.</a></p> <p dir="ltr"><img style="float: left; margin: 10px;" src="/sites/all/files/cfund//anthony_0.jpg" alt="" width="100" height="100" class="autofloat-odd " />"Regulation A+ can be used by every investor, either accredited or non-accredited. Right now all IPO are general limited to people with wide connection. Regulation A+ is going to open up by IPO to allow more people to get into the first step to the bottom line that maybe the extra potential to make money. But it doesn't seem that startups can take many advantages. Regulation A+ is more for the step-up companies, but just smaller. There is still a lot of money and documents to be required. If you don't have a business plan, you can't have a blank check. It is still too expensive for startups to involve.</p> <p dir="ltr">For Title III, it was delayed because there are too many competing people speaking, and I don't think they want to be involved with any extra potential.  It's too hard to make the hood. To pass the Title III, the biggest question is if SEC has the encouragement to do it. I don't think anything there to encourage them to put up Title III rules. Right now they are letting  a space into the raw rules. They just give Regulation A with the probability to buy some time."</p> </div> <span rel="schema:author"><a title="View user profile." href="/users/jingjing" lang="" about="/users/jingjing" typeof="schema:Person" property="schema:name" datatype="">Jingjing</a></span> <span property="schema:dateCreated" content="2015-04-08T16:35:57+00:00">Wed, 04/08/2015 - 12:35</span> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div property="schema:about" class="field__item"><a href="/tags/legal" hreflang="en">Legal</a></div> </div> <div id="comment-section"> <div class="title-line"></div> <div id="comment-container"> <div> </div> </div> <div class="cleared"></div> </div> <div id="comment-form" class="content"> <div id="respond" class="comment-respond"> <h3 id="reply-title" class="comment-reply-title"><span class="title_reply_label">Leave Your Comment</span><span class="title-line"></span> </h3> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&amp;1=5642&amp;2=comment&amp;3=comment" token="564ki2W0L6dGTXk2HbFFZ7yrbfkLOJyyMobR_0eOW1k"></drupal-render-placeholder> </div> <!-- #respond --> <div class="cleared"></div> </div> <div class="cleared"></div> Wed, 08 Apr 2015 16:35:57 +0000 Jingjing 5642 at https://fundwisdom.com https://fundwisdom.com/article/jingjing/crowdfunding-rules-regulaiton#comments https://fundwisdom.com/article/jingjing/crowdfunding-rules-regulaiton#comments Legal and Tax Implications - Venture Investing with Portals https://fundwisdom.com/article/jingjing/legal-and-tax-implications-venture-investing-portals <span property="schema:name">Legal and Tax Implications - Venture Investing with Portals</span> <div property="schema:text" class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p dir="ltr"><img alt="" data-entity-type="" data-entity-uuid="" height="154" src="/sites/all/files/cfund//alixe_cormick_4pp-300x284.jpg" style="float:right;" width="170" class="autofloat-odd " /><a href="/article/brian-thopsey/title-iii-equity-crowdfunding-update-nonaccredited-investors">JOBS Acts Title III</a> that allows non-accredited investors to involve into equity crowdfunding didn't pass in 2014, and was expected to extend to 2016. In order to eliminate the confusions about equity crowdfunding rules, we spoke with an equity crowdfunding law expert <a href="http://ca.linkedin.com/in/alixecormick/en"> Alixe Cormick</a>, the founder of <a href="http://www.venturelawcorp.com/">Venture Law Corporation</a> in Vancouver, British Columbia. She is a member of the Advisory Board of the National Crowdfunding Association of Canada.</p> <h4><span style="font-size: 1.385em; font-weight: bold; line-height: 1.538em;">Q: Why the Title III of the JOBS ACT delayed?</span></h4> <p dir="ltr">A:The title III crowdfunding exemption in the Job's Act blurs the lines between what is a public company and private company. It questions the existing securities law system requiring audited financial statements, detailed disclosure, and the use of gatekeepers to filter who gets access to capital and who does not as a public company and private company. The existing private placement rules encourage investment from a small group of people who are knowledgeable about the business and the individuals raising capital, or have an income or asset base that affords them a certain level of sophistication and ability to bear a financial loss if things do not work out.  Equity crowdfunding expands the traditional pool of private placement investors while requiring minimal disclosure in comparison to a prospectus offering or Regulation A offering. Anyone can invest under the Title III crowdfunding exemption. Investment is not limited to investors who have first-hand knowledge about the business or management, or have the financial means to weather the loss of their entire investment if things go wrong.</p> <p>As you can imagine, if fundamental principles and beliefs are being challenged by a rule which the equity crowdfunding does, it requires a full examination.  Those entrenched in the existing system are reluctant to accept any rule that changes the status quo. As far as they are concerned the existing system is working.  They are also concerned about the level of fraud and failure equity crowdfunding will bring into the marketplace and their ability to police fraud and educate the public about risk and failure. Start-up companies have a high fail rate. Not all investors may understand they are more likely to lose all their money than make any return.  Regulators are concerned about protecting investors who are at risk of losing all their investment funds.</p> <h3>Q: Is Regulation A+ Title IV a breakthrough for non-accredited investors to invest or small companies to fund?</h3> <p dir="ltr">A: Regulation A+ is going to transform how capital is raised by small issuers in the US and who invests in private companies.  Until I read the new rule in full I was concerned that it would not be useful at all to small issuers.  The rule in its present form will not be used by start-ups or even early stage companies.  The cost of preparing US GAAP audited financial statements, an offering circular, and ongoing disclosure requirements is too costly for most start-up and early stage companies.  Only the ambitious few in this group will elect to use Regulation A+ to raise capital.  The rule will however, be very useful to companies in the growth and expansion phases and companies in specialty areas like biotech that need lots of capital to advance to their next milestone. </p> <p>Regulation A+ has always allowed advertising. The old cap of $5 million would satisfy most start-up and growth companies initial needs. The problem was the cost of preparing the required Regulation A+ documents and the requirement to have Regulation A offering documents vetted by state regulators who applied their own requirements and conducted a merit review.</p> <p>Tier 1 of Regulation A+ is available to issuers raising up to $20 million. Tier 1 requires reviewed financial statements only. There are no ongoing disclosure requirements. The offering documents, however, must be reviewed by state securities regulators as well as the SEC.  It is essentially the old rule with a higher cap.</p> <p>Tier 2 of Regulation A+ pre-empts state review of the offering documents and is available to issuers raising $1 to $50,000,000.  Tier 2 requires audited financial statements and an agreement to provide ongoing disclosure including a six month unaudited financial statement and another year end audit financial statement for one year after the offering concludes.</p> <p>The new rules have a built in regulatory experiment. Specifically, will issuers prefer to provide audited financial statements and ongoing disclosure as a Tier 2 to avoid state blue sky review when raising under $20 million? Or, does the ability to provide reviewed financial statements with no ongoing disclosure obligation provide enough of an incentive for issuers to use Tier 1 even if they are subject to a blue sky review?  There are, of course, a number of other issues that clouds this type of evaluation. The investors or the broker-dealer engaged to sell the securities may demand audited financial statements in these offerings. Canadian issuers who are not reporting issuer in the US but reporting issuers in Canada already prepare audited financial statements and provide ongoing disclosure.  Issuers who already have venture capital or institutional  investors likely have audited financial statements and make ongoing disclosures similar to those required. Etc.</p> <p>Fundrise has been using the existing Regulation A to crowdfund in the US for over two years now.  They have paved the way so to speak for other real estate issuers to similarly use Regulation A+. With over 85 real estate crowdfunding platforms you should see an explosion in the use of Regulation A+ by this segment of crowdfunders.  </p> <p>How useful Regulation A+ will be to issuers and investors is yet to be determined. There are a number of different constituent groups that need to buy into the value proposition Regulation A+ potentially offers: issuers, investors, broker-dealers; legal counsel; accountants and auditors. This takes time and education. Also, broker-dealers are still subject to know your product, know your client, and client suitability rules.  Stock of small private issuers is risky and not suitable for 80% or more of the investors out there.  Regulation A+ does not solve the suitability issue of the stock being sold.  High risk stock should only ever make-up a small percentage of any investors portfolio and some investors should have no securities in this category given their age and risk aversion.</p> <p> </p> <h3>Q:What rules start-ups need to pay attention to before undertaking an online campaign?</h3> <p dir="ltr">A:All companies raising capital need to understand the requirements of the particular securities law exemption they intend to rely on to sell their securities in a promotional online campaign.  For example:</p> <p> </p> <ol><li>Is the exemption a federal securities exemption that pre-empts the need for a state securities exemption as well? If yes: Is it self-executing or do you need to do something before or after the campaign to rely on the exemption federally or in a particular state(s)? If no: Is there a matching state exemption or a different exemption you can rely on in the state(s) you plan on conducting the online campaign?</li> <li>Does the exemption include an exemption from the need for the selling agent to be registered? If yes: Is it self-executing or do you need to do something before or after the campaign to rely on the exemption federally or in a particular state(s)? If no: Have you engaged a broker dealer? Is there an exemption from registration at the state level the selling agents can rely on? (A number of states require directors and officers to register as selling agents prior to an online campaign they are conducting if a registered broker dealer has not otherwise been engagedor the company intends to conduct direct sales as well as brokered sales.)</li> <li>Does the exemption allow advertising? If yes: (1) What forms of advertising? (2) Is there any content restrictions or disclosure requirements? (3) Do you need to vet or file any advertising or marketing materials in advance or after use? (4) Who can advertise? Company? Platform? Registered broker dealer?</li> <li>Are there any pre-filing requirements related to this exemption? If yes: (1) Are there any specific forms required to be filed? (2) Do you need to prepare and provide an offering document? (3) Do you need to prepare and provide audited or reviewed financial statements?</li> <li>Are there any bad actor restrictions applicable to who can use this exemption? If yes: (1) Canvas management and everyone involved in the campaign to ensure you can use the exemption. (2) If you have a "bad actor" confirm whether or not you may be able to obtain a waiver for this person's involvement or if you can terminate their relationship with the company in order to rely on the exemption.</li> </ol><p>Review all campaign materials including: written, oral, and video with legal counsel for anything offside in securities laws, either related to the specific exemptions or in general.  Anti-fraud rules always apply when raising capital. Certain statements invite regulatory action and should be avoided.</p> <p> </p> </div> <span rel="schema:author"><a title="View user profile." href="/users/jingjing" lang="" about="/users/jingjing" typeof="schema:Person" property="schema:name" datatype="">Jingjing</a></span> <span property="schema:dateCreated" content="2015-03-26T21:45:59+00:00">Thu, 03/26/2015 - 17:45</span> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div property="schema:about" class="field__item"><a href="/tags/tax" hreflang="en">Tax</a>, <a href="/tags/legal" hreflang="en">Legal</a></div> </div> <div id="comment-section"> <div class="title-line"></div> <div id="comment-container"> <div> </div> </div> <div class="cleared"></div> </div> <div id="comment-form" class="content"> <div id="respond" class="comment-respond"> <h3 id="reply-title" class="comment-reply-title"><span class="title_reply_label">Leave Your Comment</span><span class="title-line"></span> </h3> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&amp;1=5640&amp;2=comment&amp;3=comment" token="WNue6tioBQw3W8rqRFURJjA9hqwXUakNW4ev_Lekc1M"></drupal-render-placeholder> </div> <!-- #respond --> <div class="cleared"></div> </div> <div class="cleared"></div> Thu, 26 Mar 2015 21:45:59 +0000 Jingjing 5640 at https://fundwisdom.com https://fundwisdom.com/article/jingjing/legal-and-tax-implications-venture-investing-portals#comments https://fundwisdom.com/article/jingjing/legal-and-tax-implications-venture-investing-portals#comments Title III Equity Crowdfunding Update for NonAccredited Investors https://fundwisdom.com/article/brian-thopsey/title-iii-equity-crowdfunding-update-nonaccredited-investors <span property="schema:name">Title III Equity Crowdfunding Update for NonAccredited Investors</span> <div property="schema:text" class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><h2><img alt="Angel Clipped Wings" data-entity-type="" data-entity-uuid="" src="/sites/all/files/cfund//clipping_chicken_wing.jpg" style="margin: 10px;" width="300" class="autofloat-odd " />The Wait Extends to 2016</h2> <p><span style="line-height: 1.538em;">The majority of the US population will have to wait until at least 2016 </span><span style="line-height: 20.0063037872314px;">to be able to invest in small business, with indications of further delays</span><span style="line-height: 1.538em;">. Mary Jo White and the SEC is in no rush to pass </span><a href="/about/jobs-act-title-iii" style="line-height: 1.538em;">Title III of the JOBS Act</a><span style="line-height: 1.538em;">. She has stated the SEC does not believe it has any “drop dead date” to complete its rule-making. In its recently published rulemaking agenda, the SEC set a <strong>target date of October 2015</strong> to adopt final rules regarding the offer and sale of securities through equity crowdfunding.  </span><span style="line-height: 1.538em;">The SEC has often not met the target dates included in its rulemaking agendas, so the date should not be seen as set in stone by anyone waiting to utilize these valuable funding laws.</span></p> <p><img alt="SEC Chair Mary Jo White" data-entity-type="" data-entity-uuid="" src="/sites/all/files/cfund//384px-official_portrait_of_mary_jo_white.jpg" style="margin: 10px;" width="180" class="autofloat-even " /></p> <p>April 2012 was a hopeful month for small business as President Barack Obama signed The Jumpstart Our Business Startups (JOBS) Act releasing the ban on general solicitation. Businesses could market their equity offering through rule 506C and for the most part only Accredited investors, or high net worth individuals were able to invest. Title III of the regulation proposed would allow small business to raise money from non-accredited investors, or the remaining 95% of the population, and therefore, increase the financing-investing alternatives. There is a cap of <span style="line-height: 20.0063037872314px;">$1 million in one year that can be raised through non accredited investors.</span><span style="line-height: 20.0063037872314px;"> </span><span style="line-height: 1.538em;">The main aim for this proposal was to </span><span style="line-height: 20.0063037872314px;">help small businesses raise funding from the general public via online platforms and therefore </span><span style="line-height: 1.538em;">generate growth in jobs and the economy. It is still possible to <a href="http://www.sec.gov/comments/s7-09-13/s70913.shtml" target="_blank">view and comment on the SEC regulations</a>. We believe </span><span style="line-height: 20.0063037872314px;">Title III is going to expand and </span><span style="line-height: 20.0063037872314px;">democratize</span><span style="line-height: 20.0063037872314px;"> </span><span style="line-height: 1.538em;">the private financial markets, but most of us must still wait for this moment.</span></p> <h2 style="line-height: 20.0063037872314px;"> </h2> </div> <span rel="schema:author"><a title="View user profile." href="/users/brian-thopsey" lang="" about="/users/brian-thopsey" typeof="schema:Person" property="schema:name" datatype="">Brian Thopsey</a></span> <span property="schema:dateCreated" content="2015-01-05T00:10:49+00:00">Sun, 01/04/2015 - 19:10</span> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div property="schema:about" class="field__item"><a href="/tags/legal" hreflang="en">Legal</a></div> </div> <div id="comment-section"> <div class="title-line"></div> <div id="comment-container"> <div> </div> </div> <div class="cleared"></div> </div> <div id="comment-form" class="content"> <div id="respond" class="comment-respond"> <h3 id="reply-title" class="comment-reply-title"><span class="title_reply_label">Leave Your Comment</span><span class="title-line"></span> </h3> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&amp;1=1478&amp;2=comment&amp;3=comment" token="QnhPE2P540_I27VKVfP4D56Yj-HVh08fONahG29EWWY"></drupal-render-placeholder> </div> <!-- #respond --> <div class="cleared"></div> </div> <div class="cleared"></div> Mon, 05 Jan 2015 00:10:49 +0000 Brian Thopsey 1478 at https://fundwisdom.com https://fundwisdom.com/article/brian-thopsey/title-iii-equity-crowdfunding-update-nonaccredited-investors#comments https://fundwisdom.com/article/brian-thopsey/title-iii-equity-crowdfunding-update-nonaccredited-investors#comments 2014 Year for Equity Crowdfunding, Not as Big as You Might Think https://fundwisdom.com/article/brian-thopsey/2014-year-equity-crowdfunding-not-big-you-might-think <span property="schema:name">2014 Year for Equity Crowdfunding, Not as Big as You Might Think</span> <div property="schema:text" class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span style="line-height: 20.0063037872314px;">As we begin to prepare a <a href="/content/online-equity-investment-report">2014 year in review report</a> we make the not so difficult observation that it will be the biggest year for Equity Crowdfunding in the United States. This feat is reached even while the majority of the nation is still in wait for access to invest. Funding amounts posted on equity funding platforms may appear larger due to the fact that there is no regulation around how to classify the funding round and amount invested. Below is a record of our research and a few examples of how we came to this conclusion. </span></p> <p style="line-height: 20.0063037872314px;"><span style="line-height: 20.0063037872314px;">The below is a snapshot of online equity funding activity for US based platforms for 2014 from our <a href="/crowdfunding-investors/premium-equity-investment-intelligence">premium investment tool</a>. </span><span style="line-height: 20.0063037872314px;">There are 2 large spikes in the screenshot</span><span style="line-height: 20.0063037872314px;"> which are explained below.</span></p> <p style="line-height: 20.0063037872314px;"><span style="line-height: 20.0063037872314px;"><img src="/sites/all/files/cfund//invested-circled.png" alt="" width="500" class="autofloat-odd " /><br /></span></p> <p> </p> <p style="line-height: 20.0063037872314px;"><span style="font-size: 1.385em; font-weight: bold; line-height: 1.538em;">Examples of Firms Raising Mostly Offline</span></p> <p style="line-height: 20.0063037872314px;"><span style="line-height: 1.538em;"><img style="float: left; margin: 10px;" src="/sites/all/files/cfund//angellist-logo.png" alt="angellist" width="176" height="48" class="autofloat-even " /><img style="float: right; margin: 10px;" src="/sites/all/files/cfund//life360_3.png" alt="Life360" width="147" height="60" class="autofloat-odd " /></span></p> <p style="line-height: 20.0063037872314px;"><span style="line-height: 1.538em;">The first spike represents $50 million in funding for Life360 on </span><span style="line-height: 20.0063037872314px;">AngelList. This was</span><span style="line-height: 1.538em;"> a series C funding round, or the largest funding round for any crowdfunding platform. Life360 only dedicated 1% of that amount, or $500,000, to AngelList. At half a million this would not even put the round in the top 20. Even though a small percent was raised through AngelList it is the first time a business raised series C money online. Chris Hulls, Founder &amp; CEO of Life360 shared his pleasure with his ability to extend his offering to Angels at the </span><a style="line-height: 1.538em;" href="http://www.cyberposium.com/keynote/" target="_blank">Harvard Business School Cyberposium 2014</a><span style="line-height: 1.538em;">. Who will be next to raise later stage financing?</span></p> <div><span style="line-height: 1.538em;"><br /></span></div> <p><span style="line-height: 1.538em;"><img style="float: left; margin: 10px;" src="/sites/all/files/cfund//equitynet_0.png" alt="EquityNet" width="200" height="45" class="autofloat-even " /><img style="float: right; margin: 10px;" src="/sites/all/files/cfund//galloway.png" alt="Galloway Group" width="183" height="71" class="autofloat-odd " />The second spike from above represents Galloway Realty LLC which EquityNet states, raised $17 million raised so far. We spoke to Paul Galloway and found that none of the $17 million was raised online through EquityNet. Paul stated he had raised the funds from his own network of investors.</span></p> <p> </p> <p>If the amount funded through the platform was used, the above chart would look drastically different. Below are further examples of the difficulties in classifying funded amounts.</p> <p> </p> <p><span style="line-height: 1.538em;"><img style="float: left; margin: 10px;" src="/sites/all/files/cfund//wefunder_1.png" alt="Wefunder" width="138" height="52" class="autofloat-even " /><img style="float: right; margin: 10px;" src="/sites/all/files/cfund//terrafugia-logo_230.png" alt="Terrafugia" width="230" height="69" class="autofloat-odd " />WeFunder states $11,495,200 was raised for Terrafugia. Terrafugia's 7 previous fully disclosed funding rounds total $5.8 million, part of the reported figure. </span><span style="line-height: 1.538em;">The amount WeFunder raised directly online is a portion of that remainder, but the amount is not disclosed. Our only option for us is to list the full $11 million which does not appear on the report above as Terrafugia closed the funding round in 2013.</span></p> <h2>Listing on Several Platforms Concurrently</h2> <p>Bitvore was listed on CrowdFunder, AngelList, and Fundable all at the same time. Bitvore closed a Series A round of $4.5 million. Bitvore stated they raised $1 million through crowdfunding. <img style="float: left; margin: 10px;" src="/sites/all/files/cfund//crowdfunder.jpg" alt="Crowdfunder" width="261" height="84" class="autofloat-even " /><img style="float: right;" src="/sites/all/files/cfund//bitvore-header.png" alt="Bitvore" class="autofloat-odd " />According to their <a href="https://www.crowdfunder.com/blog/bitvore-closes-series-a-round-with-nearly-1-million-from-crowdfunding/" target="_blank">Crowdfunder blog post</a><span style="line-height: 1.538em;"> $435,000 came from Crowdfunder, $200,000 was raised on AngelList, the remainder of the $1 million would have come from Fundable. On this video blog post the founders of Bitvore praise the work of Chance Barnett, Crowdfunder, and the crowdfunding industry as a whole. </span></p> <p> </p> <p><span style="font-size: 18px; font-weight: bold; line-height: 27.7087326049805px;">More Examples</span></p> <p><span style="line-height: 1.538em;">Our assumption is that these are not the only cases of online funding amounts being a fraction of the amount invested direct online, but so far the only offerings we have been able to gather details for. There is a difficulty determining just how much money is transferred online as most do not disclose this figure. We will continue to work to provide insight and transparency to the market. Please feel free to share your experiences funding in the comments below.</span></p> <p><span style="line-height: 1.538em;"><span style="font-size: 18px; font-weight: bold; line-height: 27.7087326049805px;">Conclusion</span></span></p> <p><span style="line-height: 20.0063037872314px;">Companies are using equity funding platforms as a way to market their offering to attract investment while the majority of money is being invested is being done so offline. With the proliferation of Equity <a style="line-height: 20.0063037872314px;" href="/crowdfunding-businesses/equity-based-crowdfunding-platform-costs-and-fee-structures">Crowdfunding platforms</a>, stemming from t</span><span style="line-height: 20.0063037872314px;">he lift of the ban on general solicitation through the </span><a style="line-height: 20.0063037872314px;" href="/about/jobs-act-title-iii">JOBS Act</a>,<span style="line-height: 20.0063037872314px;"> </span><span style="line-height: 20.0063037872314px;">startups have greater opportunity to raise money</span><span style="line-height: 20.0063037872314px;">.</span><span style="line-height: 20.0063037872314px;"> </span><span style="line-height: 20.0063037872314px;">Even though online funding or market activity may be difficult to determine, making our job to pull together a year end report difficult, the disruption of venture and angel investing by these platforms through transparency has no doubt helped entrepreneurs. This industry will stimulate economic growth through innovation and increased competitive pressures. This is only the beginning of that disruption. </span><span style="line-height: 20.0063037872314px;">While the US waits for </span><span style="line-height: 20.0063037872314px;">the passing of Title III of the JOBS act, countries that have allowed their entire population to invest in startups online are seeing strong innovative growth and economic impact. </span></p> <p><span style="line-height: 20.0063037872314px;">We hope to help professionals assess this new market <a href="/about/services">through innovative solutions</a>. Comment below or <a href="/contact/">contact me</a> if you have any questions.</span></p> </div> <span rel="schema:author"><a title="View user profile." href="/users/brian-thopsey" lang="" about="/users/brian-thopsey" typeof="schema:Person" property="schema:name" datatype="">Brian Thopsey</a></span> <span property="schema:dateCreated" content="2014-12-30T21:19:07+00:00">Tue, 12/30/2014 - 16:19</span> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div property="schema:about" class="field__item"><a href="/tags/legal" hreflang="en">Legal</a>, <a href="/tags/platforms" hreflang="en">Platforms</a>, <a href="/tags/investment-activity" hreflang="en">Investment Activity</a></div> </div> <div id="comment-section"> <div class="title-line"></div> <div id="comment-container"> <div> </div> </div> <div class="cleared"></div> </div> <div id="comment-form" class="content"> <div id="respond" class="comment-respond"> <h3 id="reply-title" class="comment-reply-title"><span class="title_reply_label">Leave Your Comment</span><span class="title-line"></span> </h3> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&amp;1=1431&amp;2=comment&amp;3=comment" token="nlgqUEo-ElH2mdwVpcfAvSxaJf3sQIMXVrleqrOB2r0"></drupal-render-placeholder> </div> <!-- #respond --> <div class="cleared"></div> </div> <div class="cleared"></div> Tue, 30 Dec 2014 21:19:07 +0000 Brian Thopsey 1431 at https://fundwisdom.com https://fundwisdom.com/article/brian-thopsey/2014-year-equity-crowdfunding-not-big-you-might-think#comments https://fundwisdom.com/article/brian-thopsey/2014-year-equity-crowdfunding-not-big-you-might-think#comments Non Accredited Investing - Legislative updates https://fundwisdom.com/article/andreyrus95/non-accredited-investing-legislative-updates <span property="schema:name">Non Accredited Investing - Legislative updates</span> <div property="schema:text" class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Thanks to the law firm McCarter and English for hosting a Crowdfunding event at the Cambridge Innovation Center just outside of Boston, Massachusetts. </p> <p>Benjamin Hron shared a breakdown of the affirmed and proposed legal landscape to the audience. Ben made his dissemination of the lengthy documentation available to the audience for download. This was particularly helpful for those considering investing, raising money, or building platforms in the equity based Crowdfunding business.</p> <p>This event was part of a McCarter &amp; English seminar series for entrepreneurs at the Cambridge Innovation Center.</p> <p>U.S. Rep. Patrick McHenry, Republican of North Carolina has recently visited Boston to check out on those who were affected by a bill that aims to fix a piece of legislation regarding equity-based crowdfunding. McHenry has stopped at Boston Beer Co. and at the Boston Business Journal's office to talk about that topic. JOBS Act of 2012 is one of the reasons why equity crowdfunding hasn't happened as well as the long list of rules proposed by the U.S. Securities and Exchange Commission. McHenry and the rest of the crew including U.S. Rep. Carolyn Maloney of New York, are currently working to fix the legislation, which McHenry and others say was "botched" by a Senate amendment. Mr.McHenry mentioned that: "This bill attempts to break the administrative log-jam that has kept entrepreneurs from being able to take advantage of equity crowdfunding now more than two years after the original bill's passage." <a href="http://www.bizjournals.com/boston/blog/startups/2014/06/congressman-says-newequity-based-crowdfunding-bill.html">(par.3)</a>  McHenry also answered a few questions during the event. He told that him and his team will  be able to fix the legislation next month. McHenry also answered a few questions about the feedback which he received from the tech community in Boston about equity-based crowdfunding and was very condifent that the JOBS Act will be sucessful. He said that: "We've got a better-than-even chance at success. We've got enough people that are concerned about it in both parties." <a href="http://www.bizjournals.com/boston/blog/startups/2014/06/congressman-says-newequity-based-crowdfunding-bill.html?page=2">(page 2, par. 2) </a>People want to do the right thing on this.Patrick McHenry is looking forward the new crowdfunding campaigns on the market and is ready to provide all the necessary acts to support them.</p> <p>Originally, JOBS Act edited some of the U.S. securities laws, which helped with increasing the number of investors a private firm may have, from 500 to 2000, as well as  "eliminating some hurdles for companies seeking initial public offerings"<a href="http://online.wsj.com/news/articles/SB10001424052702304163604579532251627028512">(par.2) </a>This act also helped to remove the "General Solicitation" act which prevented startups from doing promotions of their products to accredited investors. Following the events back in April 2012, it was the time when President Obama called it a turning point for small startups to raise funds. "Congress left it to the Securities and Exchange Commission to set final rules on how provisions of the new law would be implemented, a task the agency has yet to fully complete."<a href="http://online.wsj.com/news/articles/SB10001424052702304163604579532251627028512">(par.4)</a></p> <p>Lots of financial analytics argue that: "it will be difficult for entrepreneurs to tap their social networks to raise money to buy equipment, add staff or upgrade to a new office building under the law's "equity crowdfunding" provision".<a href="http://online.wsj.com/news/articles/SB10001424052702304163604579532251627028512">(par.7)</a> It is a common case that many startups might will not be able to succeed in future, but there are still lots of companies which became very successful and wealthy with the right investments made in the right time.</p> <p>It would be a great idea to allow startups to select their own offerings to list while not being under any liability for fraud by the listing companies. At this point, only accredited investors have the opportunity of buying shares online from crowdfunding websites while other investors with less money are able to perform rewards-based crowdfunding and get something in reward for doing that. </p> <p>SEC has performed an analysis and determined that: "lifting the so-called general solicitation ban has resulted in nearly 900 new offerings that raised a combined $10 billion. Over the same period, 9,200 offerings were filed by small firms under the old rules, raising a total of more than $233 billion".</p> <p>A process where <a href="/crowdfunding-businesses">startups </a>are able to raise money from <a href="/crowdfunding-investors">investors </a>online is also known as Equity Crowdfunding. There are numerous <a href="/funds-being-raised-by-platform">platforms </a>available online which help entrepreneurs connect with investors. At <a href="/about">Fund Wisdom</a>, our mission is to help entrepreneurs connect with the investing audience by selecting the top platforms which are provided on our website with all the <a href="/crowdfunding-businesses/equity-based-crowdfunding-platform-costs-and-fee-structures">costs and fees for each of them</a>. Go ahead and start seeing your business grow now!</p> <p>Sources used: <a href="http://www.bizjournals.com/boston/blog/startups/2014/06/congressman-says-newequity-based-crowdfunding-bill.html" target="_blank">http://www.bizjournals.com/boston/blog/startups/2014/06/congressman-says-newequity-based-crowdfunding-bill.html</a><br /><a href="http://online.wsj.com/news/articles/SB10001424052702304163604579532251627028512">http://online.wsj.com/news/articles/SB10001424052702304163604579532251627028512</a></p> <p> </p> <p><span style="line-height: 1.538em;">April 2012 was a hopeful month for small business as President Barack Obama signed The Jumpstart Our Business Startups (JOBS) Act.  Title III of the regulation proposed would allow small business to raise money from non-accredited investor and therefore, increase the financing-investing alternatives with the main aim to generate growth for both intermediaries. More than two years later final rules are still in wait leaving many non accredited investors at the edge of their seat.</span></p> <p><span style="line-height: 1.538em;">Since the regulation was approved, different pressures have been taking to set the rules. The most relevant one has been the role of the Crowdfunding Intermediary Regulatory Advocates (CFIRA), which has been issuing letters and recommendations for the final rules.  Douglas S. Ellenoff, attorney at Ellenoff Grossman &amp; Schole LLP explains that the main reason for the delay resides in the lack of consensus among the commissioners of the Security Exchange Commission (SEC).  Moreover, he adds that there is certain skepticism in allowing non-accredited individuals to invest.</span></p> <p><span style="line-height: 1.538em;">It is obvious that title III is going to change crowdfunding market in terms of intermediaries and deals. It will democratize and re-regulate the investment market and now it is time to see if it will work. The truth is that while Security Exchange Commission is boarding other topics, there is an anxious crowd market waiting to open the doors to new investors and deals that allow both investors and companies to growth and thus, generate economic prosperity.</span></p> <p><span style="font-size: small;">Sources:</span></p> <ol><li><a href="http://www.crowdfundinsider.com/2014/09/47718-release-title-iii-securities-based-crowdfunding-rules-new-investing-model/" style="line-height: 1.538em;"><span style="font-size: xx-small;">http://www.crowdfundinsider.com/2014/09/47718-release-title-iii-securities-based-crowdfunding-rules-new-investing-model/</span></a></li> <li><a href="http://www.forbes.com/sites/maryjuetten/2014/08/21/jobs-act-and-crowdfunding-will-they-finally-releasetherules/" style="line-height: 1.538em;"><span style="font-size: xx-small;">http://www.forbes.com/sites/maryjuetten/2014/08/21/jobs-act-and-crowdfunding-will-they-finally-releasetherules/</span></a></li> <li><a href="http://blogs.law.harvard.edu/corpgov/2013/12/06/jobs-act-title-iii-crowdfunding-moves-closer-to-reality/" style="line-height: 1.538em;"><span style="font-size: xx-small;">http://blogs.law.harvard.edu/corpgov/2013/12/06/jobs-act-title-iii-crowdfunding-moves-closer-to-reality/</span></a></li> <li><span style="font-size: xx-small;"><a href="http://earlyinvesting.com/jobs-act-title-iii/" style="line-height: 1.538em;">http://earlyinvesting.com/jobs-act-title-iii/</a></span></li> </ol><p> </p> </div> <span rel="schema:author"><a title="View user profile." href="/users/andreyrus95" lang="" about="/users/andreyrus95" typeof="schema:Person" property="schema:name" datatype="">andreyrus95</a></span> <span property="schema:dateCreated" content="2014-06-11T15:48:47+00:00">Wed, 06/11/2014 - 11:48</span> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div property="schema:about" class="field__item"><a href="/tags/legal" hreflang="en">Legal</a></div> </div> <div id="comment-section"> <div class="title-line"></div> <div id="comment-container"> <div> </div> </div> <div class="cleared"></div> </div> <div id="comment-form" class="content"> <div id="respond" class="comment-respond"> <h3 id="reply-title" class="comment-reply-title"><span class="title_reply_label">Leave Your Comment</span><span class="title-line"></span> </h3> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&amp;1=283&amp;2=comment&amp;3=comment" token="xzgwb9J5RcAW7IeFIQPIKtSnh-R_KbIEGwnvGSH1LZI"></drupal-render-placeholder> </div> <!-- #respond --> <div class="cleared"></div> </div> <div class="cleared"></div> Wed, 11 Jun 2014 15:48:47 +0000 andreyrus95 283 at https://fundwisdom.com https://fundwisdom.com/article/andreyrus95/non-accredited-investing-legislative-updates#comments https://fundwisdom.com/article/andreyrus95/non-accredited-investing-legislative-updates#comments