Today the crowdfunding industry took another stride towards success as the SEC held an open meeting discussing the proposed rules for Title III. After what seemed like a quick and efficient conversation, the rules were proposed by a unanimous vote. A summary of those proposed rules can be found below:
– Have a business plan and describe the business
– Disclose the name of officers, directors, and current owners of the business
– Describe the pricing of the equity offerings and how the proceeds will be used
– **Provide financial statements reaching two years back, or the most current statements and income tax filing for newer businesses
– For campaigns of $100,000 or less, issuers must provide a financial statement certified by the principal executive officers.
– For issues between $100,000 to $500,000, issuers must provide financials certified by the principal executive officer.
– **For issues over $500,000, issuers must provide an independently audited financial statement
– No blank check companies can use crowdfunding rules
– **Annual reports will be required for crowdfunding companies going forward
– **Issuers can raise $1M per year from unaccredited investors
– **Funding portals will be seen as a new class of broker
– Crowdfunding must be performed by funding portals registered with the SEC or registered brokers
– Intermediaries (portals) may be required to perform background check on issuers and their principals
– **Intermediaries must verify investors’ eligibility to make a crowdfund investment
– Intermediaries must make available to investors information about campaigns
– May not give financial advice
– Intermediaries are required to provide educational materials on risk for investors.
– **FINRA will release rules in the coming days
“We want this market to thrive,” says SEC Chair White.