When the Jumpstart Our Business Startups Act (the “Act”) was signed into law it provided for a 270 day period for which the Securities and Exchange Commission had to implement the rules.
This meant that that your company was not going to be able to use the Crowdfunding exemption to sell equity, until the rules were implemented. Until then, federal and state securities law prohibitions remain in place against publicly accessible Internet securities offerings.
The SEC is months behind schedule and still cannot say when they will issue those guidelines.
David Blass, a chief counsel at the Securities and Exchange Commission, said his team is working diligently to craft regulations required to give the go-ahead to equity crowdfunding sites, which were authorized a year ago as part of the Act. However, mounting concerns over potential investment fraud and a leadership change at the agency has slowed the process, and on Monday,
The delays and continued silence from regulators have frustrated entrepreneurs actually building the new sites, who jumped at the opportunity when lawmakers authorized crowdfunding but are still waiting to set their new ventures in motion.
The SEC’s making way for a number of startups and online investment platforms to enable startups to crowdfunding investment. Recently a site called FundersClub received notice from the SEC that the agency would not pursue action against its crowdfunding platform. Another site, AngelList, received similar assurances
In each case the company operating the site serves as an investment advisor, and operates as a platform through which accredited investors would be able to put money into startups. The company then would introduce individual investment vehicles for each portfolio company and provides to each investor the opportunity to invest.
This article is not intended to replace legal advice and we would strongly recommend that if your company is considering this approach as a method of raising money that you first talk to a lawyer and your accountant.
Paul D. Creme is an attorney with Hamblett & Kerrigan PA. His practice is focused on business and corporate law. Of particular interest are the areas of software and emerging technologies. You can reach Attorney Creme at [email protected].