Logologo image
Close Button
Close Button


Through our experience working with hundreds of issuers, we have developed a streamlined, efficient and cost-effective legal strategy that can benefit your business in its capital raising endeavor today.

View Regulation Crowdfunding FAQs

Reg CF Issuers

What is Equity Crowdfunding?

Regulation Crowdfunding (aka “Regulation CF” or “Reg CF”), is a new securities exemption that allows non accredited investors to invest in private companies. Startups, emerging companies and other privately owned businesses that are formed in the United States may utilize this exemption to raise up to $5 million dollars per 12 month period. All Regulation CF offerings must be facilitated through an online SEC and Finra registered intermediary, which come in the flavors of broker-dealers or “funding portals.” To learn more about funding portals, click here.

What types of companies are not eligible to rely on Reg CF?

Certain companies are not eligible to use the Regulation Crowdfunding exemption.

These include:

  • Non-U.S. companies.
  • Companies that already are Exchange Act reporting companies.
  • Certain investment companies.
  • Companies that are disqualified under Regulation
  • Crowdfunding’s disqualification rules.
  • Companies that have failed to comply with the annual reporting requirements under Regulation Crowdfunding during the two years immediately preceding the filing of the offering statement; and
  • Companies that have no specific business plan or have indicated their business plan is to engage in a merger or acquisition with an unidentified company or companies.
  • Additionally, Rule 503 of Regulation Crowdfunding includes a “bad actor” disqualification provision which prohibits an issuer to rely on the Reg CF exemption if a covered person of the issuer has been convicted of or are subject to court or administrative sanctions for securities fraud or other violations of specified laws.

My company is not incorporated in the U.S.A. Can I fundraise with Reg CF?

Reg CF is only available to U.S. incorporated entities. However, offshore companies that launch a newly formed business in the United States whose operations take place in the United States are eligible to utilize this exemption.

What is a disqualifying event?

Under the final rules of Regulation Crowdfunding, as amended, a disqualifying event includes: certain criminal convictions, certain court injunctions and restraining orders, certain final orders of certain state and federal regulators, certain SEC disciplinary orders, certain SEC cease-and-desist orders, suspension or expulsion from membership in a self-regulatory organization (SRO), such as FINRA, or being barred from association with an SRO member; SEC stop orders and orders suspending the Regulation A exemption; and U.S. Postal Service false representation orders. The lookback period for determining whether a covered person is disqualified is measured from the time the securities are sold in the relevant offering.

How much money can I raise for my business under Regulation Crowdfunding?

Private companies eligible to rely on Reg CF may raise up to $5,000,000 during a 12-month period.

Pro tip: Companies looking to raise crowdfunding investments over the $5 million limit, may consider fundraising in “side-by-side” offerings, under Reg D, Rule 506(c) and Reg CF. Others may be better suited for another securities exemptions under the JOBS Act, such as Regulation A+.

What types of companies are good candidates for equity crowdfunding?

Equity crowdfunding is industry agnostic and could be part of a successful fundraising strategy for almost any privately owned entity. We’ve worked with emerging companies in the Food & Beverage, Blockchain, Real Estate, Technology, Media, Fintech, Alcoholic Beverage, Social Impact, Water and Fashion industries, as well as artists, restaurateurs, and developers crowdfunding real estate, among others. The exemption is appropriate for companies looking to streamline their next financing round through the use of an online platform to collect crowdfunding investments.

Does the SEC charge a fee when I file the Form C?

No, there are no SEC fees associated with a Form C filing. However, there will likely be fees in connection with legal counsel, accounting and marketing. Additionally, funding portals are considered brokers and may charge diligence fees or take commissions. Funding portals are permitted to take transaction-based compensation in the form of cash-based or securities-based commission, which is limited to a percentage of the same class of security being sold in offering. For example, Republic charges 5% — 7% of the funds raised in cash, plus 2% as a Crowd Safe. StartEngine charges 7% of the total capital raised, an additional 2% in equity, and $10,000 in deferred revenue, collected once the offering is complete.

Are rolling closes allowed in Reg CF offerings?

Yes. If the Target Offering Amount is reached prior to the Closing Date and the Intermediary consents, the Issuer may conduct the first of multiple closings of the Offering early, provided all Purchasers will receive notice of the closing at least 5 business days prior to such closing (absent a material change that would require an extension of the Offering and reconfirmation of the investment commitment). Generally, purchasers who committed on or before such notice will have until 48 hours prior to such closing to cancel their investment commitment. If the Issuer does conduct one of multiple closings, the Issuer may only withdraw the corresponding amount from escrow after the Target Offering Amount has been reached and after 21 days have passed from the opening. A successful fundraise will usually close earlier than the deadline, although it must be open for at least 21 days.

What is the Offering Deadline?

The Offering Deadline is the latest date on which an Issuer can raise the Target Offering Amount. If the Issuer does not raise the Target Offering Amount by the Offering Deadline, it cannot close the offering.

When is an Issuer required to file a Form C/A?

If there are material changes, additions or updates to the information provided to investors on the intermediary’s platform then an amendment is required which is a Form C/A. If there are immaterial changes, additions or updates, then the Issuer may file a Form C/A but is not required to. However, the best practice is to do so regardless of materiality.

Who is eligible to invest in a Reg CF offering?

Regulation Crowdfunding allows companies to solicit investments from “the crowd”: both accredited and non-accredited investors. A non-accredited investor is any investor who does not meet the income, net worth or suitability requirements set by the SEC. In effect, this allows companies seeking capital to raise funds from friends, family, its customer base, community and others with whom it does not already know, in an online, disclosure focused environment, hosted by the funding portal.

Unlike in a Regulation D offering, there is no restriction on the total number of investors; however, Section 12(g) of the Exchange Act registration is required if an issuer, on the last day of its fiscal year, has total assets greater than $25 million and the class of equity securities is held by more than 2,000 persons, or 500 persons who are non-accredited investors.

Do I have to register my company as a reporting company under Section 12(g)?

Securities issued pursuant to Reg CF are conditionally exempted from the record holder count under Section 12(g) if the Issuer: (1) is current in its ongoing annual reports required pursuant to Reg CF; (2) has total assets as of the end of its last fiscal year of $25 million or less; and (3) has engaged the services of a transfer agent registered with the SEC. As a result, Section 12(g) registration is required if an Issuer has, on the last day of its fiscal year, total assets greater than $25 million and the class of equity securities is held by more than 2,000 persons, or 500 persons who are not accredited investors. In that circumstance, an Issuer is granted a two-year transition period before it is required to register its class of securities pursuant to Section 12(g), so long as it timely files all of the annual reports required by Reg CF during such period. An Issuer seeking to exclude a person from the record holder count of Section 12(g) is responsible for demonstrating that the securities held by the person were initially issued in an offering made under Section 4(a)(6).

Are non-natural persons that invest in Regulation Crowdfunding offerings subject to investment limits?

The investment limits in Rule 100(a)(2) of Regulation Crowdfunding apply to all non-accredited investors. Instead of calculating investment limits based on annual income, net worth or suitability, a non-natural person calculates the limits based on its revenue and net assets (as of its most recent fiscal year end).

Source: SEC C&DI.

What are the financial disclosure requirements under Reg CF?

Companies are required to disclose all pertinent past and future financial information, which includes:

  • The names of each person who is a beneficial owner of 20% or more of the issuer’s outstanding voting equity securities.
  • The price of the securities or the method for determining the price.
  • The organization’s ownership and capital structure, among other disclosures.

Issuers are also required to provide financial statements in accordance with U.S. GAAP principles covering the two most recently completed fiscal years.

  • Companies offering $107,000 or less: financial statements and certain federal income tax returns need to be certified by the principal executive officer. If an issuer has reviewed financial statements or audited statements by a public accountant, those statements will need to be included.
  • Companies offering more than $107,000 but not more than $535,000: financial statements reviewed by a public accountant that is independent of the company are required.
  • First-time Regulation Crowdfunding companies offering more than $535,000: must provide reviewed financial statements. If, however, a Company has previously sold securities in reliance on Regulation Crowdfunding, the financial statements need to be audited by a public accountant.

In reliance on the SEC temporary relief that was implemented due to the Covid-19 pandemic, eligible issuers offering $250,000 or less in a 12 month period are exempt from certain financial statement review requirements for offerings initiated between May 4, 2020 and August 28. 2022.

What types of securities can my company offer in its Regulation Crowdfunding campaign?

Issuers can offer various securities types, including common or preferred stock, debt, SAFEs, revenue sharing agreements, and convertible notes.

Pro tip: Check with your funding portal to see if they have any restrictions on which securities it allows companies to offer on its site. Some funding portals do!

Can I sell security tokens in a Regulation CF offering?

Yes! Like all issuers, STO issuers may register their security tokens with the SEC or utilize an exemption from registration to sell the digital asset securities. The JOBS Act exemptions are included! Companies can thus tokenize ownership in their businesses or assets and sell security tokens under Reg CF, Reg D, Rule 504, Rule 506(b) or Rule 506(c), or Reg A+.

Reg CF is also an innovative solution for blockchain companies seeking to “airdrop” their tokens a compliant manner. Companies in the pre-sale phase of their STO, may also offer convertible securities that convert into tokens (e.g., SAFEs, Token DPA,).

What is a SAFE?

A SAFE is agreement that, similarly to a warrant, entitles investors to an equity position in the company in the future. Typically, the SAFE converts into equity when the company achieves a priced financing round in the future or IPO. SAFEs do not have an interest rate, maturity date or repayment schedule.

What is a Convertible Note?

A Convertible Note is a debt instrument that typically converts into equity when the company completes a future priced financing round, upon a certain maturity date or IPO. This instrument allows investors to loan money to startup companies and, in return, convert their principal + interest to equity in the company. If the company fails or if there is an early liquidation event, the crowdfunding investors (as creditors) will be paid ahead of all equity holders.

How does a SAFE compare to a Convertible Note?

A SAFE is an equity agreement and a Convertible Note is a debt instrument. A SAFE, unlike a debt instrument, does not carry any interest rate. Rather, it more simply a contract for future equity in the company. In contrast, a Convertible Note is a loan that converts into the company’s capital stock in the future. Holders of these instruments are likely i) not equal in the capital stack, ii) taxed differently, and iii) treated differently in a liquidation.

How does Republic’s Crowd SAFE differ from traditional SAFEs?

Like traditional SAFEs, holders of the Crowd SAFE get a financial stake in the company when a certain “trigger event” occurs, such as the company’s acquisition or IPO. A Crowd SAFE differs from traditional SAFEs in that it allows companies to distinguish between major investors (who invest a threshold investment amount) and non-major investors, and establish a special shadow shares of conversion shares with limited voting and information rights.

Further, if a company chooses to conduct a subsequent equity financing round, they may elect to “roll-over” SAFE holders and continue the terms of the Crowd SAFE or convert the Crowd SAFE holders into capital stock. A Crowd SAFE may be favorable to investors as well. For example, if there is a liquidity event, investors may have the option to have their cash returned or convert the security into stock.

What information can an issuer disseminate prior to filing Form C with the SEC and providing it to the funding portal?

Information not constituting an offer of securities may be disseminated by an issuer prior to the commencement of a Regulation Crowdfunding offering. For example, factual business information that does not condition the public mind or arouse public interest in a securities offering is not an offer and may be disseminated widely.

The Commission has interpreted the term “offer” broadly and has explained that “the publication of information and publicity efforts, made in advance of a proposed financing which have the effect of conditioning the public mind or arousing public interest in the issuer or in its securities constitutes an offer…” Securities Offering Reform, Release No. 33-8591 (July 19, 2005). See also Securities Act Rule 169 and Securities Act Rule C&DI 256.25.

Per the new Rule 241, issuers may now use generic solicitation of interest materials for an offer of securities prior to determining whether to utilize Regulation Crowdfunding, or another securities exemption, in its capital raising activity. The generic testing-the-waters (TTW) materials would have to contain certain legends for investor protection. Any TTW materials utilized within 30 days of the filing of the issuer’s offering statement with the SEC (in the case of Reg CF or Reg A+), would need to be exhibited to the offering materials filed with the Commission.

May an issuer advertise the “terms of the offering” under Regulation Crowdfunding?

Yes, but any such advertising that is made other than through communication channels provided by the intermediary on the intermediary’s platform will be limited to notices that include no more than the information described in Rule 204(b) of Regulation Crowdfunding. “Terms of the offering” is defined to include “the amount of securities offered, the nature of the securities, the price of the securities and the closing date of the offering period.” See Instruction to Rule 204. Source: SEC C&DI. Under the 2020 amendments, the “terms of the offering” now also includes a brief description of the planned use of proceeds of the offering, and information on the issuer’s progress toward meeting its funding goals. Furthermore, issuers are permitted to engage in oral communications with potential investors, as long as that communication complies with Rule 204 and the Form C is filed.

Am I able to pool Reg CF investors into a Special Purpose Vehicle (SPV)?

Traditionally, issuers were not permitted to make use of SPVs to pool crowdfunding investors into a single vehicle, amounting to a single line item on the cap table. In November 2020, the SEC added a new exclusion under the Investment Company Act (Rule 3-a9) to facilitate issuer’s use of SPVs in the crowdfunding context. Under this new rule, crowdfunding vehicles will not fall under the definition of an “investment company” so long as the crowdfunding vehicle would serve “solely as a conduit to directly hold the securities of the crowdfunding issuer without the ability for independent investment decisions to be made on behalf of the crowdfunding vehicle.”

What are proxies?

A proxy takes voting power away from a shareholder and puts it into hands of the proxyholder, usually the Funding Portal or the Executive Officer of the Issuer. The proxyholder will vote the securities in line with the majority of that class of security holders outstanding. This allows decision making to be consolidated with a third party, thereby streamlining and unifying the process. Some Funding Portals require that the shareholder grant an Irrevocable Proxy to the Intermediary. The Intermediary will vote the interests at its discretion, consistently with the majority of the stock on which the Offering is based.

What are Custodians?

A Custodian, which is usually a financial institution, takes title to the securities for the benefit of the investors. The use of a Custodian minimizes the risk of theft or loss of the securities. Custodians can hold the securities in electronic or physical form, and they do not have voting rights unless specifically assigned by proxy. Importantly, the use of a custodian solves the aforementioned 12(g) reporting requirement. Custodian fees vary depending on the services provided and the value of the holdings. Usually, Custodians will charge quarterly “custody fees” based on the aggregate value of the investor’s holdings.

What is the background on the SEC Final Rule Changes to Regulation Crowdfunding?

The SEC had proposed amendments to the Reg CF Final Rules designed to, in its own words, “simplify, harmonize, and improve certain aspects of the exempt offering framework to promote capital formation while preserving or enhancing important investor protections.” Two significant proposed changes were removing the limit on how much an accredited investor can invest in a Reg CF offering and increasing the Offering Limit from $1.07 million per year to $5 million per year. These two proposals together would allow Funding Portals to earn greater profit for each offering. Another important proposal is to allow Testing the Waters for Reg CF. Initially, Issuers interested in using Reg CF could not advertise the offering until it is live on a Funding Portal. With this proposed change, Issuers would be able to “test the waters,” which means that Issuers could solicit nonbinding indications of interest from investors before the offering goes live. The Proposed Rules underwent a Comment Period until June 1, 2020. Click here for an SEC summary of the Proposed Rules and click here for the full text.. As of November 2, 2020, the SEC has adopted these proposed amendments. Click here for the full text of the Final Rules, as amended.

Reg A+ Issuers

What types of companies can rely on the Reg A+ exemption?

American and Canadian companies with a principal place of business in the U.S. or Canada may rely on the exemption. There may also be eligibility beyond domicile. For example, a company may be domiciled with its operations based in France but so long as there is a U.S. or Canadian location from which the Officers direct and control the company’s activities, the Reg A+ exemption is applicable.

My company is not incorporated in the U.S.A. Can I fundraise with Reg A+?

Yes, if your company is incorporated in Canada you may fundraise with Reg A+.

What are the benefits of conducting a Tier 1 v. Tier 2 offering?

Regulation A includes two tiers of offerings – Tier 1 and Tier 2 offerings. An issuer in a Regulation A Tier 1 offering is permitted to raise up $20 million per 12 month period.

Under the Tier 2 rules, which have been recently amended, issuers are permitted to raise up to $75 million per 12 month period. The primary downside of the Tier 1 rules is that the offering has to comply with all applicable blue-sky requirements of the states where the issuer sells securities. The Tier 1 rules do not require the financial statements disclosed in the offering to be audited, but a number of states still prescribe the fulfillment of the audit, which can outweigh an important benefit of conducting the offering under Tier 1. Similarly, some states require the qualification of the offering by state securities regulators in addition to the review and qualification by the SEC. By contrast, the Tier 2 rules preempt state registration requirements, which presents a significant advantage over a Tier 1 offering. However, the issuer relying on Tier 2 must provide audited financial statements in the offering circular, and as a part of its annual report. Further, the issuer is subject to semi-annual financial reporting requirements and must file a current report within four business days of certain events. Finally, under Reg A, Tier 2, if the securities being offered are not to be listed on a national securities exchange, the maximum amount that non-accredited investors may invest is limited to 10 percent of the greater of the investor’s annual income or net worth (primary residence excluded). For more information on the nuances of Tier 1 v Tier 2 please contact us for a discussion with our qualified attorneys.

Do I have to register my company as a reporting company under Section 12(g)?

Securities in a Tier 2 offering are exempted from the mandatory registration requirements of the Exchange Act Section 12(g) if the Issuer meets all of the following conditions:

  • Engages services from a transfer agent registered with the Commission.
  • Remains subject to a Tier 2 reporting obligation.
  • Is current in its annual and semiannual reporting at fiscal year-end.
  • Has a public float of less than $75 million as of the last business day of its most recently completed semiannual period, or, in the absence of a public float, had annual revenues of less than $50 million as of its most recently completed fiscal year.

An issuer that exceeds the dollar-amount and Section 12(g) registration thresholds has a two-year transition period before it must register its class of securities, provided it timely files all of the ongoing reports required under Regulation A.

Do I need to hire a broker-dealer?

Technically, no. But it is in your best interest to do so. Before the Jobs Act, a Regulation A offering required the Issuer to comply with state Blue Sky laws in each state where it intended to sell securities. This could be a lengthy, tedious and expensive process which required a broker-dealer that was familiar with each state’s laws. Under the JOBS Act, the new Reg A+ exemption did away with the state review requirement and only requires federal, SEC approval. However, each state can still regulate who can sell Reg A+ securities within their borders and, of course, each state may regulate differently. A broker-dealer licensed in each state the Issuer is targeting will be familiar with the specific laws regarding who can sell securities, when registration is required, and under what circumstances securities can be sold. Thus, it behooves Issuers to use a broker-dealer to save time and money trying to decipher and comply with the many applicable laws.

What are my ongoing reporting requirements?

Depending on the Tier, there is a very active and ongoing reporting schedule. Tier 1 Offerings only require the Issuer to file an Exit report on EDGAR within 30 days of the termination or completion of an Offering. Tier 2 Offerings require a company to file annual and semiannual reports, as well as current event reports, special financial reports, and Exit reports. Each report has its own requirements. For example, the annual report is due within 120 calendar days of the company’s fiscal year end and requires information about the preceding three fiscal years and two years of audited financial statements, among other disclosures.

How much time will it take before I can launch my company’s offering?

Generally, this process takes about 3-6 months. However, every Offering is different and is reviewed on an individual basis. Based on our experience, it usually takes 30 to 60 days for legal, accountant and broker-dealer review and approval. Thereafter, there is a two to fourth month SEC review process. It is important to note that once an Offering has been filed with the SEC and the Form 1A is complete, the timing is controlled solely by the SEC; therefore, government closures or emergencies can alter the timeline. Lastly, the Issuer is also required to file specific documents and information with FINRA, per Rule 5110, aka the Corporate Financing Rule. FINRA will review the filing and either provide “No objection,” or if it finds that the one or more of the proposed terms are unfair and unreasonable it will object. If there are objections, the Issuer must then amend its filings to comply.

What are the fees?

There are various fees. If a broker-dealer is engaged then there is a FINRA 5110 fee, which is usually $500 plus .015% of the proposed maximum Offering (not to exceed $225,000). The fee is calculated when the Gross Proposed Maximum Aggregate Offering Price is entered. However, if the Offering if filed with a Form S-3 or F-3 registration statement with SEC and offered by a Well-Known Seasoned Issuer under Securities Act Rule 415, the fee will be $225,000. There will also be legal fees incurred with the Form 1A filing. [note: Manhattan Street Capital estimates “$50k or more, payable to the legal service provider to do the work of gaining SEC qualification for a Tier 2 offering.” And “more for a Tier 1.”] There will also be accounting fees associated with a U.S. GAAP audit [note: Manhattan Street Capital estimates this starts at about $2k] and Escrow fees will be approximately 0.5% of capital raised. Issuers should also consider marketing costs, which will vary by circumstance.

What is a Well-Known Seasoned Issuer (WKSI)?

The term is defined in Securities Act Rule 405. A WKSI is an Issuer that meets the Form S-3 and Form F-3 and either: (1) “as of a date within 60 days of determination date, has a worldwide market value of its outstanding voting and non-voting common equity held by non-affiliates of $700 million or more”; or (2) “as of a date within 60 days of the determination date, has issued in the last three years at least $1 billion aggregate principal amount of non-convertible securities, other than common equity, in primary offerings for cash, not exchange, registered under the [Securities] Act.”

Reg D, Rule 506(c) Issuers

What is Title II of the JOBS Act?

Title II lifted the ban on General Solicitation and paved way for a bifurcated Rule 506 in which old rule became 506(b) and new securities exemption became 506(c). A ban on General Solicitation prevents Issuers from communicating with potential investors without having a prior substantive relationship. For example, Issuers could not post on a website to announce a company seeking funding, so many investment opportunities were hidden from the public. By allowing General Solicitation to accredited investors, Issuers could show the investment opportunities that were previously secured behind firewalls. Title II revolutionized capital raising by opening up the online investing system, which enabled Issuers to attract more and new investors.

When did Reg D, Rule 506(c) come into effect?

The SEC created Rule 506(c) in July 2013 and the finalized rules took effect on September 23, 2013.

What are the benefits of conducting a Reg D, Rule 506(b) v. 506(c) offering?

Rule 506(c) allows Issuers to Generally Solicit anyone, although they can only accept investments from Accredited Investors. When deciding between 506(b) and 506(c), it’s important to note that once you’ve generally solicited your offering, it can then only be a Rule 506(c) Offering. Because Rule 504 prohibits General Solicitation, the Issuer must have a pre-existing, substantive relationship with the investors. Issuers using Rule 506(b) can accept investments from Accredited Investors and up to 35 unaccredited, but Sophisticated Investors. This term is somewhat open to interpretation because investors can self-certify that they are Accredited or Sophisticated. Generally, investors may be considered Sophisticated when they have knowledge and experience in financial and business matters such that they could understand the benefits and risks of the prospective investment.

What is General Solicitation?

General Solicitation is not a defined term, but it refers to public advertising. The SEC issued a guidance, which clarified a few key points. An Issuer’s publicly available website that shows “factual business information” is not considered General Solicitation. However, opinions about the value of a security are generally not factual business information and should only be posted to a website with restricted access. Using publicly available websites to make an offer does constitute General Solicitation. Additionally, the SEC clarifies than an issuer may rely on a “pre-existing, substantive relationship” between itself and the prospective investor, or between the prospective investor and either a registered investment adviser or registered broker-dealer. The criteria for such a relationship varies by circumstance.

“Demo day” communications, such as communications made in connection with a seminar, accelerator, or angel investor group, are not considered general solicitation or general advertising. Certain restrictions apply to the activities of the sponsor of such demo day activities.

Who is allowed to invest in my company’s Reg D, Rule 506(c) offering?

Accredited Investor is a defined term in Rule 501. There are three ways than an individual investor may be accredited. He or she could be a “director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer.” There are also net worth and income-based qualifications. An investor is accredited if his or her “net worth, or joint net worth with that person's spouse, at the time of purchase exceeds $1 million,” or if the investor has “income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.” There is no requirement than an individual be from the United States, however if the investor is not, then the securities laws in the jurisdiction where the investor resides must be complied with. There are also various entities that are considered Accredited Investors, such as financial institutions, trusts any entity in which all of the equity owners are Accredited Investors.

What is the accreditation verification process?

There are various ways to become verified as an investor. The prospective investor can contact an attorney, Certified Public Accountant, broker-dealer or investment adviser, or use an online service, such as Verify Investor, to gain accreditation. The process could be as simple as providing your two most recent tax returns, or a copy of a current bank statement.

Pursuant to the 2020 amendments, an issuer may rely on a prior verification of an investor’s accredited status. The investor must provide a written representation that he or she continues to qualify as an accredited investor. The issuer may rely upon such prior verification for five years.

Which service providers can help me with accreditation verification checks?

A registered broker-dealer, SEC-registered investment adviser, licensed attorney, or Certified Public Accountant can write a letter verifying your status as an Accredited Investor. You may also work with our sister company, VerifyAI, to meet these compliance obligations for your company.

Do I need to hire a broker-dealer?

Not necessarily, but a broker-dealer would be help by providing “broker of record services.” When an Issuer is selling securities, they are able to do so under an Issuer exemption, therefore they are not deemed to be conducting broker-dealer activities. However, this exemption is not acknowledged by some states. Those states may require that those persons register as Issuer-Dealers, this is also called “agent registration.” Thus, even though these individuals are selling securities on behalf of company they may own, they must make Issuer-Dealer filings. The benefit of a broker-dealer is that they have already made these Dealer filings in the respective states and their registration will cover the activities of the company, alleviating the Issuer from having to make these filings.

Am I permitted to “test the waters” before identifying a specific exemption under which my securities will be offered?

Under the 2020 amendments, issuers are now permitted to put out “generic solicitation of interest materials” before identifying a specific exemption under which securities will be offered. Issuers may communicate orally or in writing with potential investors to gauge whether there is interest from the public. Please note that investors still may not conduct solicitation, accept money, or accept either a binding or non-binding commitment from potential investors until the registration exemption is identified. If an offering is initiated within 30 days of a generic solicitation, the issuer must make the generic solicitation materials available as an exhibit in the offering materials.

Will I be permitted to rely on registration exemptions when filing two offerings within a narrow time frame?

Regulation Crowdfunding offerings will be integrated with another offering if an analysis of the “facts and circumstances” of the particular offering require such action. Under the new Rule 152(a) and (b), the appropriateness of registration exemptions shall be evaluated under a “general principle of integration” that would apply in all cases not covered by one of four safe harbor exemptions.

Given the increased offering limit and amended investment limits, will I have any further investor protection obligations under the new rules?

In general, it appears that the SEC is satisfied that existing Regulation Crowdfunding investor protections are sufficient. The amendments do not appear to substantially alter existing reporting requirements, filing requirements, or issuer eligibility requirements.

Navigation Guide

  • Reg CF Issuers
  • Reg A+ Issuers
  • Reg D, Rule 506(c) Issuers

Connect With Us

Get In Touch!

Our team is ready to answer your queries