SEC’s Unanimous Vote Leads to Proposed Rules for Equity Crowdfunding

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:

Rules:

Issuers Must:

– 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

Other/Funding Portals

– **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.