“Title III Equity CrowdFunding” Regulation & Registration

By Martin Tate, Partner CARMAN LEHNHOF ISRAELSEN LLPCrowdFund Beat   Sr. Guest  Contributor,

On November 16, 2015, the Securities and Exchange Commission (“SEC” or “Commission”) approved new rules, regulations and forms to permit companies to offer and sell their securities through approved crowdfunding portals in reliance on the exemption under Section 4(a)(6) of the Securities Act of 1933 (“Securities Act”).  These new rules implement the requirements of Title III of the Jumpstart Our Business Startup (“JOBS”) Act.

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The Commission set forth the regulatory framework for registration of crowdfunding intermediaries, which include broker-dealers and certain intermediaries established solely to facilitate crowdfunding transactions, referred to as “Funding Portals”.  The rules require that each intermediary in a crowdfunding transaction register with the Commission as a broker-dealer or a funding portal. Broker-dealers register with the SEC using existing Form BD, while Funding Portals register with the Commission using Form Funding Portal.  The SEC began accepting registrations from Funding Portals using the new Form Funding Portal on January 29, 2016.  Form Funding Portal consists of sections related to, among other things, identifying and disclosure information about the Funding Portal and its control persons, non-securities related businesses and compensation arrangements.  The SEC hopes this form will enable the Commission to obtain sufficient information about the Funding Portal while at the same time facilitating an efficient registration process.


In addition to registering with the SEC, Funding Portals must also register with FINRA.  FINRA suggests that Funding Portals begin this process by reserving a name using the FINRA Firm Name Reservation Request Form.  Funding Portal applicants must next complete the FINRA Entitlement Forms, submit fingerprints for each person who is a partner, officer, director or employee of the firm (with certain exceptions) and pay the necessary application fees.  Once these steps have been completed and the Funding Portal firm is entitled (has login credentials), a Funding Portal applicant may access the Funding Portal Gateway and submit Form FP-NMA.


Although the registration process is not overly complex, the process may be somewhat overwhelming for the applicant that is dealing with the SEC Edgar system or the FINRA entitlement process for the first time.  Funding Portal applicants must remember that it is important that they provide sufficient and accurate disclosures using the supplied forms.


Marty Tate

Marty TateMarty counsels his clients on various forms of structured finance, securities matters, private and public offerings, SEC reporting, 1934 and 1940 Act compliance, mergers and acquisitions, real estate financings, venture capital and angel financings, fund formation and compliance, business formation and corporate governance. Over the past five years, Marty has been active in advising clients in the crowdfunding and peer-to-peer lending space, with a particular focus on the JOBS Act, 506 offerings, intrastate offerings and Regulation A. His clients in this space include nationally and internationally recognized platform operators, sponsors, issuers, investors and service providers.
Prior to joining CLI, Marty served as General Counsel and Director for Harbor Capital Partners, a private investment company. He also served as in-house counsel for other funds and investment groups and continues to focus a large part of his practice on issues surrounding private funds. His clients in this area include hedge funds, private equity funds, venture capital funds where he provides counsel relating to fund formation and structuring, regulatory compliance, investment structuring and reporting issues. He has assisted in the formation of numerous domestic and offshore funds in various structures and has advised investment managers and investment advisors on state and SEC compliance issues associated with the management of such funds.
Marty also represents a number of entrepreneurs, small and large companies as well as private investors, finance companies, national and regional banks, investment banks and venture capital and private equity firms. In working with such clients, he regularly advises on various transactions, financings, contracts and agreements in an array of matters. Throughout his career, he has provided counsel in association with over $500 million in debt and equity financings.


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