Finally It’s Here! SEC to Vote on Title III Crowdfunding

By Jonathan B. Wilson CrowdFundBeat Sr. Guest Editor, Partner, Taylor English Duma LLP 

Nearly three years after the Congressional deadline to adopt rules to implement crowdfunding under Title III of the JOBS Act of 2012, the SEC has announced that it will vote on October 30, 2015 on the adoption of draft rules first published in 2013. http://www.sec.gov/news/openmeetings/2015/ssamtg103015.htm?_ga=1.94118175.326329035.1446044009

Title III of the JOBS Act, which passed Congress on a bipartisan basis and was signed into law by President Obama in April 2012, was one of the most sweeping changes to U.S. securities laws in decades.

File photo of the SEC seal in Washington

In addition to the changes it made to Regulations A and D, the JOBS Act also amended the Securities Act of 1933 to create a new exemption under Section 4(a)(6) for securities that were issued through licensed “funding portals”.  Securities issued under this new exemption would be limited to $1 million per year.  The JOBS Act also contemplated limits on the amount that could be invested by any individual investors.  These amounts were to be $2,000 or 5% (whichever is greater) for people earning (or worth) up to $100,000, and $10,000 or 10% (whichever is less) for people earning (or worth) $100,000 or more.

What made this new exemption under Title III of the JOBS Act so revolutionary is that it allowed the issuer of the securities to advertise the availability of its securities publicly and to openly solicit investors to explore the offering.  The other exemptions traditional used by small businesses under the 1933 Securities Act generally required that there be no public solicitation or advertising of the sale.

 

Congress left the implementation of Title III of the JOBS Act to the SEC, however, and put forth few rules in the statute to define “funding portal” and the kinds of rules that would govern funding portals.  Many industry participants assumed that funding portals would get paid out of the proceeds of the securities offering, however, and that concept ran afoul of other traditional assumptions within the SEC’s jurisdiction that generally prohibited persons from taking commissions on the sale of securities unless those persons are licensed broker-dealers.

Because of the lack of affirmative direction on this point in the JOBS Act and the SEC’s reluctance to open a crack in the door that had long remained closed against the collection of commissions by unlicensed broker-dealers, the SEC labored for a long time over how to regulate funding portals.

The SEC’s draft rules, released in 2013, require funding portals to be licensed by FINRA, but mandated a less rigorous level of examination than that imposed on broker-dealers.  Since then, FINRA has also adopted a set of rules for funding portals, which became effective several weeks ago.  (FINRA’s finalization of its rules was thought by many to be a leading indicator of the SEC’s coming adoption of its own rules).

Presumably, by announcing a date for the vote, the SEC is prepared to adopt its proposed rules which would be effective after a final version of the rules is published in the Federal Register.

125

 

 

 

 

 

About the Author
Jonathan B. Wilson is a partner in the Atlanta business law firm of Taylor English Duma. He has practiced as an attorney for nearly 25 years and has served as the in-house general counsel for two public companies. He represents Fortune 100, middle-market and start-up companies in matters involving securities, corporate finance and governance, mergers and acquisitions, and intellectual property. He is a frequent speaker and writer on the JOBS Act, crowdfunding and Regulation A+.

 

Tags: , , , , , , , , ,

HEADLINE NEWS

Baltimore SunHarford still opposes crowdfunding sites for school donationsBaltimore SunRaising money through online crowdfunding sites is an ideal way for teachers to find the funds to purchase classroom materials and should be restored, the head of the Harford County teachers' u [...]

U.S. News & World ReportNo Cash for Hate, Say Mainstream Crowdfunding FirmsU.S. News & World ReportThe block on mainstream crowdfunding is just the latest blow to far-right activists operating online. In the last 24 hours, neo-Nazi website the Daily Stormer had its domain regi [...]

LITTLE GUIDANCE FROM IRS ON TAXING CROWDFUNDING CONTRIBUTIONSBloomberg BNAWhether it's a musician raising money to produce an album, an inventor with a great idea, or a family in distress that needs help, crowdfunding through platforms such as Indiegogo and Kickstarter has become [...]

Crowdfunding: Funding ideas the right wayReuters (press release) (registration)The term “crowdfunding”, or “crowdsourcing”, refers to an open call made to the world via the Internet to solicit funds from interested parties to finance a business or social project. The funds received ma [...]

Crain's Cleveland Business'Smaller' gifts can go long way for Clinic's crowdfunding platformCrain's Cleveland BusinessFor an institution accustomed to securing multimillion-dollar donations, Cleveland Clinic's latest fundraising effort has some relatively [...]

What do you think of crowdfunding campaigns?Japan TodayI think that if there is a responsibility and guarantee of sorts that the crowdfunding site will actually act with the users to go after companies which waste money or run off with it, then it would be a great thing for the future [...]

ForbesWhat Works In Equity Crowdfunding -- Insights From ResearchForbesAs we have recently celebrated the fourth anniversary of the signing of the JOBS Act into law, it is a good time to take stock of the effect that the legislature had on equity crowdfunding in the United States. It [...]

VentureBeatAmid Silicon Valley crackdown on alt-right, Gab social network ...VentureBeatAs high-tech firms have begun taking steps to weed out some of the most offensive right-wing hate groups, alternative social network Gab has seen a surge in ...Gab is becoming a haven for hate spee [...]

FortuneIndiegogo's Difficult Path to Offering Equity CrowdfundingFortuneIndiegogo founder Slava Rubin discusses how Indiegogo's equity crowdfunding service has been performing since its launch in 2016. Photograph by Indiegogo. E-mail; Tweet; Facebook; Linkedin. Share icons. [...]

The HinduKoodiyattam centre goes for crowdfundingThe HinduThe goal is to raise the sum through the crowdfunding platform BitGiving (https://www.bitgiving.com /nepathya) to train a new generation of artistes in what constitutes the only surviving form of ancient Sanskrit theatre in the [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |