Crowdfunding Funding Portals
The primary way that you will be able to offer your stock to investors will be by posting information about your Crowdfunding offering on a Funding Portal Website.
Funding Portals will have to register with the Commission as a funding portal. They will be required to:
- Provide such disclosures, including disclosures related to risks and other investor education materials, as the Commission shall, by rule, determine appropriate;
- Ensure that each investor–
- reviews investor-education information, in accordance with standards established by the Commission, by rule;
- positively affirms that the investor understands that the investor is risking the loss of the entire investment, and that the investor could bear such a loss; and
- answers questions demonstrating–
- an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small issuers;
- an understanding of the risk of illiquidity; and(iii) an understanding of such other matters as the Commission determines appropriate, by rule;
- Take such measures to reduce the risk of fraud with respect to such transactions, as established by the Commission, by rule, including obtaining a background and securities enforcement regulatory history check on each officer, director, and person holding more than 20 percent of the outstanding equity of every issuer whose securities are offered by such person;
- Not later than 21 days prior to the first day on which securities are sold to any investor (or such other period as the Commission may establish), make available to the Commission and to potential investors any information provided by the issuer required by the Act;
- Ensure that all offering proceeds are only provided to the issuer when the aggregate capital raised from all investors is equal to or greater than a target offering amount, and allow all investors to cancel their commitments to invest, as the Commission shall, by rule, determine appropriate;
- Make such efforts as the Commission determines appropriate, by rule, to ensure that no investor in a 12-month period has purchased securities offered pursuant to section 4(6) that, in the aggregate, from all issuers, exceed the investment limits set forth in section 4(6)(B);
- Take such steps to protect the privacy of information collected from investors as the Commission shall, by rule, determine appropriate;
- Not compensate promoters, finders, or lead generators for providing the broker or funding portal with the personal identifying information of any potential investor;
- Prohibit its directors, officers, or partners (or any person occupying a similar status or performing a similar function) from having any financial interest in an issuer using its services; and
- Meet such other requirements as the Commission may, by rule, prescribe, for the protection of investors and in the public interest.
So you begin to see crowdfunding will not be a free-for-all fundraising method. The JOBS ACT requires these portals to take actions to assure crowdfunding investors receive proper disclosures, that the limitations on investment amounts and offering terms are met, and that nobody is compensated for raising the money, among other things.
Please schedule a Risk Free Consultation by clicking the button on the site if you’d like more information on Crowdfunding and Raising Money under the JOBS Act or any other aspect of Going Public.