On July 10, 2013, the Securities and Exchange Commission adopted bad actor disqualification provisions for Rule 506 of Regulation D under the Securities Act of 1933, to implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The disqualification and related disclosure provisions appear as paragraphs (d) and (e) of Rule 506 of Regulation D.
If you are meeting with an Investment Bank then your company has the need to raise capital from outside investors to fuel its growth. An Investment Bank is the intermediary between your company and investors through a capital raise process. Having an Investment Bank handle your capital raise allows for an independent party to structure a viable transaction that is fair and balanced for the you, the Issuer, and Investors.
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to educate investors about a new investing opportunity in the form of securities-based crowdfunding.
Crowdfunding generally refers to a financing method in which money is raised through soliciting relatively small individual investments or contributions from a large number of people. Over the last few years, crowdfunding websites in the United States have proven a popular way by which to solicit charitable donations and to raise funds for artistic endeavors like films and music recordings.
Under recently adopted rules, the general public will have the opportunity to participate in the early capital raising activities of start-up and early-stage companies and businesses. Starting May 16, 2016, companies can use crowdfunding to offer and sell securities to the investing public.
The SEC approved FINRA’s proposed Funding Portal Rules and related forms for SEC-registered funding portals that become FINRA members pursuant to the crowdfunding provisions of Title III of the JOBS Act and the SEC’s Regulation Crowdfunding. FINRA’s Funding Portal Rules will become effective on January 29, 2016, which aligns with the effective date of the SEC’s registration rules under Regulation Crowdfunding. This Notice provides a brief overview of the new Funding Portal Rules and provides information for prospective funding portals that plan to apply for FINRA membership.
The text of the Funding Portal Rules is available on FINRA’s website. The related forms are available for reference in the Appendices. (As discussed further in this Notice, prospective funding portals must file all forms electronically through FINRA’s Firm Gateway. The forms will be accessible on Firm Gateway effective January 29, 2016.)
Questions regarding this Notice should be directed to:
- Alissa Robinson, Director, Membership Application Program, at (212) 858-4764; or
- Adam Arkel, Associate General Counsel, Office of General Counsel, at (202) 728-6961.
Download the FINRA Notice to Members 16-06
2015 was a monumental year for startups and small businesses and their capital raising options. The JOBS Act was approved by President Obama on April 5, 2012. After waiting for 3 years for all the pending rules to become finalized there was momentum in 2015. First, Regulation A+, title IV of the JOBS Act, was approved and effective as of June 18 2015. Then the SEC approved Equity Crowdfunding, Title III of the Jobs Act, on October 30, 2015. To prepare for Equity Crowdfunding going into effect on May 16, 2016, listen to these podcasts discuss, advise and inspire motivated entrepreneurs growing their businesses through raising capital.