Crowdfunding Delay from the SEC

crowdfunding-delaysBusiness owners and investors have been anxiously waiting for the SEC to finalize their crowdfunding regulations since the JOBS Act was passed in 2012.  It has been two years and we are still waiting.  In 2013, the SEC issued their proposed rules and we have reviewed them extensively on this blog.  They covered everything from who can be involved, how much money can be raised, the amount individual investors can contribute and more.  In total, the document is over 500 pages long.  Since issuing the proposal, the SEC has been accepting comments from anyone related to the industry in order to get feedback on which part of the proposed rules to keep and which ones need adjusting.

The Proposed Rules Have Been Scrapped

Last week the SEC’s crowdfunding advisory board, a panel of 21 people, voted unanimously that they proposed rules do not meet the spirit or guidelines outlined in the JOBS Act.  In other words, they need to be scrapped and the SEC must start again.  Considering it took a year and a half to issue the first set of proposed rules this is not good news for the crowdfunding community.

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Final Crowdfunding Rules Not Likely Until Late 2014

Seal of the U.S. Securities and Exchange Commi...
Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

Final crowdfunding rules are not likely to be in place until late 2014 because the Financial Industry Regulatory Authority and the Securities and Exchange Commission need to take more action, according to a blog on corporate and securities regulation. blog said today that Finra still needs to create a regulatory system for funding portals and the SEC is still developing rules.

“As a result, the ability to do exempt crowdfunding offerings remains limited, except that many are anticipating the ability to do more accredited investor-only crowdfunding offerings once general solicitation is permitted under Rule 506 after the September 23, 2013, effective date of those JOBS Act mandated rule changes,” the authors noted. added the SEC’s proposed amendments to Regulation D and Form D to have investor safeguards when the general solicitation ban is lifted is drawing fire as not being faithful to the JOBS act’s goal of promoting capital formation.

The SEC’s crowdfunding rules will set the standards for exempt crowdfunding offerings to non-accredited investors, subject to a $1 million cap over a rolling 12-month period and dollar limits on an investor’s financial position. is an educational service that provides guidance on legal issues involving corporate and securities regulation and corporate governance practices.

Source: – Ted Knutson

The World Crowdfunding Federation

World Crowdfund Federation Launches Across Five Continents (via PR Newswire)

Trade associations around the globe form federation to support crowdfunding WASHINGTON and TORONTO, Oct. 4, 2012 /PRNewswire-USNewswire/ — Today crowdfunding associations in the United States, Canada, Nigeria, Australia, Israel, India and Brazil announced the formation of the World Crowdfund Federation…

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logo_home_pageStreamline the document preparation and disclosure process for the companies that want to pursue equity-based crowdfunding transactions through your brokerage or registered crowdfunding portal. With the average equity-based crowdfunding transaction raising approximately $85,000 (source,, what is the legal budget for preparing term sheets and definitive agreements to close the transaction? If the entrepreneurs who wish to crowdfund need to form a new entity, what is the legal budget for preparing the certificate of incorporation, bylaws and other corporate formative documents? What is the legal budget for the smaller transactions? Answer, a couple of thousand dollars, maximum. Otherwise, the transaction costs swallow the deal.

With our document generation API, VentureDocs integrates seamlessly with brokers and registered crowdfunding portals and delivers these key documents in execution form for a fraction of the cost of a corporate and securities attorney, and the customer never even has to leave the broker or crowdfunding portal’s site.

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Securities and Exchange Commission has approved a proposed amendment

Seal of the U.S. Securities and Exchange Commi...
Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)


NEW YORK, Oct 17 (Reuters) – The U.S. Securities and Exchange Commission has approved a proposed amendment from Wall Street’s industry-funded regulator that helps investment banks use a new U.S law aimed at easing the way for small companies to go public.


Six months after the JOBS (Jumpstart Our Business Startups) Act was passed amid much fanfare as a way to help companies raise money in public markets, banks have not embraced some key provisions, which allow analysts to join bankers on pitches to investors, and publish research reports before a company goes public.


The new amendment from the Financial Industry Regulatory Authority, effective immediately, eases the restrictions somewhat by aligning rules of the financial watchdog with those of the JOBS Act. The SEC approved the amendment on Oct. 11.


The rule change removes the previous 40-day quiet period after an initial public offering so underwriters can publish research. The change would also allow analysts and bankers to attend IPO pitch meetings or “bakeoffs” together, as long as the analysts don’t solicit business.


However, the FINRA change involving communication between analysts and their investment banking colleagues does not apply to Wall Street’s largest banks, bound by a separate regulation, the Global Research Settlement.


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As the expected deadline for the SEC to publish rules and regulations enacting the Crowdfunding Act (Title III of the Jumpstart Our Business Startups Act (JOBS Act)) grows nearer, it is a good time for a complete overview of crowdfunding.  New Sections 4(6) and 4A of the Securities Act of 1933 codify the crowdfunding exemption and its various requirements as to Issuers and intermediaries.  The SEC is in the process of drafting the underlying rules and regulations which will implement these new statutory provisions.


The Crowdfunding Act amends Section 4 of the Securities Act of 1933 (the Securities Act) to create a new exemption to the registration requirements of Section 5 of the Securities Act.  The new exemption allows Issuers to solicit “crowds” to sell up to $1 million in securities as long as no individual investment exceeds certain threshold amounts.

The threshold amount sold to any single investor cannot exceed (a) the greater of $2,000 or 5% of the annual income or net worth of such investor, if the investor’s annual income or net worth is less than $100,000; and (b) 10% of the annual income or net worth of such investor, not to exceed a maximum $100,000, if the investor’s annual income or net worth is more than $100,000.  When determining requirements based on net worth, an individual’s primary residence must be excluded from the calculation.  Clearly there is a conflict in the language determining threshold amounts.  An investor could fall within both categories.  The conflict has been pointed out in numerous letters to the SEC and will presumably be addressed in the rule making.

In addition, Section 302 of the Crowdfunding Act requires that all crowdfunding offerings be conducted through an intermediary that is a broker dealer or funding portal that is registered with the SEC and a member of a registered self-regulatory organization (SRO).  Currently that SRO is Financial Industry Regulatory Authority (FINRA).


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Crowdfunding Pioneers Launch Professional Association in Concert with Regulatory Advocacy Group


Sister organizations dedicated to representing rapidly developing Crowdfunding industry and supporting SEC, FINRA during rule making period post JOBS act:

NEW YORK, May 7, 2012 /PRNewswire/ — A group of top debt and equity crowdfunding platform and industry experts today announced the creation of the Crowdfunding Professional Association (CfPA), which will operate as a complementary sister entity to the Crowdfund Intermediary Regulatory Advocates (CFIRA) organization. Both non-profit organizations have been formed as a result of the Jumpstart Our Business Startups (JOBS) Act, which was signed into law on April 5th. By creating a legal framework for “crowdfund investing,” this historic act unleashes the potential for a much larger and expanded global crowdfunding community. The goal of the Crowdfunding Professional Association is to facilitate a vibrant, credible and growing global crowdfunding community while advocating for an industry view versus personal interests or a single company perspective. The complementary CFIRA organization is focused exclusively on channeling industry expertise to support the Securities & Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other affected governmental and quasi-governmental entities, including state regulators, in the establishment of industry regulation, standards and best practices.

“Having worked over the past two years in developing the framework and foundational elements of the acts that passed both houses of Congress and ultimately the JOBS act signed by our president, I am thrilled to join with a broad coalition of crowd pioneers in the creation of a truly crowd-sourced professional association,” said Sherwood Neiss, co-author of the CrowdFund Investing Framework in the JOBS Act, co-founder of Startup Exemption and a founding member of the leadership group behind both non-profit crowdfunding sister entities. “In addition to its formation, we are announcing the appointment of the association’s first executive committee chair, and a governance structure and founding team. As challenging as it was to enact this law, we as industry participants recognize that the difficulties in developing the industry have only begun and that we must collaborate to ensure that crowdfunding is both preserved and developed to achieve its maximum potential in terms of credibility, transparency and best practices.”

Berkeley Geddes, CEO of Grow America Insight and, has been elected chair of the Crowdfunding Professional Association Executive Committee and Governance Board. The Crowdfunding Professional Association’s Executive Committee will work closely with Mr. Geddes to build a lasting network and organization that will provide advocacy, foster integrity and champion the burgeoning global crowdfunding industry and vast ecosystem. For more information on the governance structure visit

“America needs to get this right,” said Mr. Geddes. “As a nation, we need to lead and restore our seed funding markets in support of good people with good ideas, chasing their dreams. As members of the crowd, we can build a powerful and credible crowdfunding coalition that fuels the creation of new ideas, new businesses and jobs. We look forward to supporting the evolution of this community and harnessing the experts, entrepreneurs, pioneering platforms and visionary investors across the globe.”

The Crowdfunding Professional Association’s core principles are designed to achieve the following objectives:

  • Establish the highest ethical industry standards to ensure the successful expansion of the crowdfunding industry
  • Develop broad crowdfunding training and certification programs to solidify the implementation of necessary ethical standards and practices
  • Create ongoing industry trade show summits, symposiums and sub committees to further develop an ecosystem of industry experts, best practices, and leadership and mentoring opportunities
  • Represent the industry through media and government relations to ensure major thought leaders understand and have access to the fundamental industry facts/research, crowdfunding experts and platform leaders

“We welcome the creation of this industry body, which we view as strategic to not only fostering new forms of crowdfunding investments, but also to preserving the unique innovations and progress achieved by the early adopters and founders of the industry,” said Brian Meece, co-founder and CEO RocketHub. “Having an organization that represents the industry is essential and we look forward to supporting the efforts of the Crowdfunding Professional Association and the development of this vital industry.”

For a complete overview of membership, leadership and sponsorship opportunities visit Basic membership is free for the first year.

“Crowdfunding’s promise for igniting new, early-stage ventures is revolutionary,” said Alan E. Hall, a founding sponsor of the Crowdfunding Professional Association and founder of Grow America SpringBoard and Mercato Partners. “We look forward to supporting this groundbreaking development through the Crowdfunding Professional Association. It is our desire to help drive and mold this new capital creation model from its very foundation to ensure that it develops efficiently and safely. Managed properly, crowdfunding can fuel the involvement of hundreds of thousands of additional entrepreneurs, and allow many more investors to participate in the creation of companies and jobs that our economy so desperately needs.”

“We look forward to coordinating our efforts with the Crowdfunding Professional Association and are committed to complementing their mission with our laser focus on ensuring that a crowdfunding investment framework thrives in the U.S. so entrepreneurs can innovate and create new jobs,” said Candace Klein, co-chair of CFIRA and founder and CEO of Bad Girl Ventures and SoMoLend. “During this critical 270-day rule-making period and beyond, we will serve as a voice of the industry with the appropriate regulators and provide continuing regulatory education to the industry. CFIRA and CfPA will closely collaborate to make this happen.”

“Fostering the adoption of best practices for the operation of crowdfunding platforms globally is essential to the success of our industry,” said Carl Esposti, founder of and leader of the CAPS Accreditation Program for crowdfunding platforms and a founding Crowdfunding Professional Association executive committee member. “The Crowdfunding Professional Association is a critical piece of the puzzle and central to establishing accessible Crowdfunding Accreditation for Platform Standards, which is why I’ve worked to support the creation of this association and am pleased to serve on the executive committee.”

“Over the past year, we have hosted crowdfunding summits around the world to raise awareness, share best practices and to foster a coalition of crowdfunding industry participants,” said David Drake, Co-Founder of The SoHo Loft Capital Creation Events and a founding member of the leadership group behind both non-profit crowdfunding sister entities. “We are delighted to be a part of the formation and launch of the Crowdfunding Professional Association and view its function as central to the success of our industry.”

“As a founding supporter of the Crowdfunding Professional Association, our law firm is committed to not only establishing a thriving industry association, but also 100 percent behind this innovative new capital creation model,” said Daniel DeWolf, Co-Chair of the Venture Capital and Emerging Companies practice group of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. “We look forward to helping build a strong foundation for the industry and its varied ecosystem of participants.”

“The potential applications of crowdfunding are just beginning to break the surface,” said Steve Cinelli, Chief Executive Officer of PRIMARQ and a founding Crowdfunding Professional Association executive committee member. “Real Estate equity share finance empowered by crowdfunding platforms is emblematic of the diversity of this industry. Whether crowdfund investing in companies, participating in real estate price movement or other alternative asset classes, the Crowdfunding Professional Association will play an important role in addressing capital formation in key segments of economies both at home and abroad.”

About Crowdfunding Professional Association
The Crowdfunding Professional Association is dedicated to facilitating a vibrant, credible and growing crowdfunding community while also advocating for an industry view versus a single company perspective. Uniting a broad-based coalition of industry participants, the association is committed to ensuring the credible development of the industry, including a commitment to the highest ethical standards. The association’s collaborations and insights are shared broadly to avoid onerous, stifling bureaucracy that can endanger innovation, idea generation and job creation. For more information visit

Crowdfund Intermediary Regulatory Advocates, or CFIRA, was established following the signing of the Jumpstart Our Business Startups (JOBS) Act. CFIRA is an organization formed by the crowdfunding industry’s leading platforms and experts.  The group will work with the Securities & Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other affected governmental and quasi-governmental entities to help establish industry standards and best practices. For more information, visit

CONTACT: Barbara Thatcher, Thatcher+Co, +1-408-701-7528,


SOURCE Crowdfunding Professional Association

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