Showing 33 posts in Crowdfunding.
Since the passing of the Crowdfunding Act in December 2013, many questions concerning the applicability of the law have surfaced. This past month, the Michigan Municipal League launched CrowdfundingMI.com, a website pertaining to crowdfunding in Michigan. It is an excellent resource intended to answer basic questions and importantly, aimed to help local businesses connect with investors. The website provides general information, along with frequently asked questions, and tutorials regarding the benefits of crowdfunding Read More ›
This post will discuss the definition of an “accredited investor.” The distinction between accredited and non-accredited investors is important. Non-accredited investors cannot invest more than $10,000 under Michigan’s new intrastate crowdfunding exemption. Accredited investors, on the other hand, are not subject to the $10,000 investment cap. Read More ›
Part 1 of this series discussed the 12 basic requirements that must be met to utilize Michigan’s new intrastate crowdfunding exemption.
This post will take a deeper look at Requirement 2. As noted in Part 1, Requirement 2 states that the offer must meet the requirements for the federal exemption for intrastate offerings under Section 3(a)(11) of the Securities Act of 1933 (the “1933 Act”). Read More ›
Note: This post is Part 1 of a multi-part series regarding Michigan's new crowdfunding law
It's official, crowdfunding is legal in Michigan. So, what does that mean for your business? Let's start with the basics.
Federal and state law prohibit a business from selling a security unless: (A) the security is registered with the SEC, or (B) an exemption from registration is applicable. Registration is expensive, so nearly all businesses try to satisfy an exemption from registration. Historical exemptions have made it difficult for businesses to receive investment from "non-accredited" investors and flat out prohibit "general solicitation" (i.e., public advertising of the investment, including advertising on the Internet). Those historical difficulties, however, have recently been eased. Read More ›
Posting of Issuer Disclosures. In prior blog posts, we described the disclosure obligations imposed on the issuer (the company that is raising capital) under the SEC's proposed crowdfunding regulations. (Read: The SEC Crowdfunding Proposed Regulations: Overview of Offering Statement & Non-Financial Disclosure Requirements and The SEC Crowdfunding Proposed Regulations: Overview of Issuer Financial & Disclosure Requirements). The proposed regulations impose certain requirements on the funding portal to make sure that these issuer disclosure obligations are met. Specifically: Read More ›
In the release accompanying the proposed crowdfunding regulations, the SEC explains its view that Congress anticipated that crowdfunding would occur exclusively through electronic media. The SEC's proposed rules are intended to facilitate the exclusive use of electronic media.
Under the proposed rules, before an investment commitment may be accepted by an intermediary, the intermediary must require the investor to:
The SEC's proposed crowdfunding regulations include a number of specific steps that an intermediary is required to take in order to reduce the risk that an issuer (the company raising capital) does not use the intermediary's platform to engage in fraud. The intermediary is viewed as a check and balance on the crowdfunding marketplace. Among an intermediary's responsibilities are the following: Read More ›
Reminder: The SEC public comment period is coming to a close Feb. 3, 2014.
Neither a funding portal, nor its officers, directors, partners or persons occupying a similar status with the funding portal, are allowed to:
The role of a funding portal is to facilitate a crowdfunded transaction involving a sale from the issuer (the company raising capital) to the investor. A funding portal does not have the legal authority to facilitate secondary market activity, i.e., bringing together a seller and buyer in a transaction in which the seller is an investor who previously acquired the security either from the issuer or from another investor. In order to legally facilitate secondary market transactions, the intermediary would have to register as an exchange or alternative trading system. A funding portal registration does not grant this authority. Read More ›
We continue our series on the proposed crowdfunding regulations issued by the SEC on Oct. 23, 2013 by turning our attention to the portion of the proposed regulations that relate to intermediaries of crowdfunding transactions.
An "intermediary" is the facilitator of a crowdfunding transaction through which issuers offer to sell securities and investors sign up to purchase securities. A registered broker may act as a crowdfunding intermediary. The activities involved in acting as an intermediary are already within the scope of the licensed activities of a registered broker. Read More ›