'Regulation' Crowdfunding is Finally Here
Some call it equity crowdfunding. Some call it Title III crowdfunding. Now apparently the SEC calls it regulation crowdfunding.
December 10, 2015 at 07:28 PM
6 minute read
Some call it equity crowdfunding. Some call it Title III crowdfunding. Now apparently the SEC calls it regulation crowdfunding. Regardless of what it is called, it is finally legal. On Oct. 30, 2015, the SEC issued final rules and forms implementing Title III of the JOBS Act. This comes more than three years after the enactment of the JOBS Act, and more than two years after the SEC was required by Congress to implement final rules legalizing Title III crowdfunding.
Title III of the JOBS Act was intended to be the marriage between the social networking world that we have become, and the traditional and regulated capital-raising world that has existed for many, many years by making it possible for companies seeking capital to reach nonaccredited investors through offerings of equity on the Internet. Plagued by years of disagreement focusing on the implementation of the difficult statutory scheme that Congress handed to the SEC in Title III, as well as concerns about the heightened opportunity for fraud and abuse that Title III potentially brings, the rule-making process was stalled in the SEC for a long time. Not any longer.
In the world of raising capital in compliance with federal and state securities laws, there is a popular saying among those in the know—every offering is either registered, exempt from registration, or illegal. Prior to Title III, an offering over the Internet to the “masses” would have been illegal. Now, Title III creates a new exemption from registration under the Securities Act of 1933 for a new form of crowdfunding. This new form of crowdfunding must be conducted through “crowdfunding intermediaries”—Internet portals that meet certain conditions in order to handle these crowdfunding offerings. Any company utilizing Title III must follow a strict set of implementing rules in order to avail itself of this new exemption from registration.
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