The Jumpstart Our Business Startups (JOBS) Act1 established a framework for small businesses to raise funds through crowdfunding—a method of raising capital by using the Internet for a wide range of ideas and ventures. Section 4(a)(6) of the Securities Act of 1933 (Securities Act), added by the JOBS Act, exempted crowdfunded offerings from the registration provisions of the Securities Act and instructed the Securities and Exchange Commission (SEC) to pass rules to facilitate this new method of capital formation. A prior column by the author discussed the mechanics and disclosure obligations the new crowdfunding rules imposed on issuers.2
Crowdfunded offerings must be made through SEC registered broker-dealers or a new type of regulated intermediary called a funding portal. This column will discuss the SEC’s rules for funding portals adopted in November 2015.3 Regulation Crowdfunding will become effective May 16, 2016. The forms that will enable funding portals to register with the SEC became effective Jan. 29, 2016.
