01 Feb Crowdfunding Portals: Ready to Register

As we know, Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 set up a system for companies to raise up to $1 million from any number of investors, whether or not accredited, without SEC registration of the offering. All offerings must be through an SEC-registered broker-dealer or an “investment portal,” a new concept created in the bill. Portals do not need to be broker-dealers, but most probably will be. The idea is that the intermediary is there to protect investors.

As of Friday, potential portals now may apply to register with the SEC and the Financial Industry Regulatory Authority (FINRA) for approval to operate. Deals, however, cannot commence until May of this year. Law360 reports that advocates of what I call “statutory crowdfunding” (because it’s under the JOBS Act and the only thing actually officially called crowdfunding) believe it will be a boon to small business, whereas critics worry about fraud.

Add this to the list of new arrows in the quiver of small companies seeking a variety of crowdfunding choices, including Regulation A+ and Regulation D Rule 506(c) offerings, all also created by the JOBS Act. The proposed changes to Regulation D Rule 504 could be potentially ground-breaking as well. Not to mention the continued growth of “non-equity” crowdfunding sites like Kickstarter, which are actually raising money for early stage companies.  Let’s hope Title III crowdfunding does indeed make an impact.