BizTech Law Blog
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:
- Have any type of financial interest in an issuer (the company raising capital) who is selling securities through the funding portal’s platform; or
- Receive a financial interest in an issuer as compensation for services provided to or for the benefit of an issuer in connection with the offer and sale of securities.
A funding portal may not receive special or additional compensation for highlighting an issuer or offering on the funding portal’s platform.
A funding portal is permitted to compensate a third party who is not a registered broker or dealer for referring a person to the funding portal, so long as:
- The third party does not provide the funding portal personally identifiable information (e.g., information that can be used to distinguish or trace an individual's identity) of an investor or potential investor; and
- The amount of compensation paid is not based on the purchase or sale of a security through the funding portal’s platform.
For example, payments for hyperlinks meeting the foregoing requirements are permitted.
A funding portal is permitted to pay compensation to or receive compensation from a registered broker or dealer for services in connection with the offer or sale of securities by the funding portal on its platform so long as:
- There is a written agreement between the funding portal and the registered broker or dealer
- The compensation is not otherwise prohibited (such as for personally identifiable information)
- The compensation complies with and is not prohibited by applicable FINRA rules
If a funding portal’s advertisements identify an issuer as having an offering on the funding portal’s platform, the funding portal may not receive any special or additional compensation for identifying the issuer.
A funding portal is required to comply with anti-money laundering and privacy laws to the same extent as those laws apply to registered brokers.
Please contact Iris Linder (517.371.8127 or ilinder@fosterswift.com) for more information.
