Regulations for Crowd Funding

Welcome to this week’s installment on raising capital! Head over to our Youtube channel and take a look at this article from Laura Anthony’s Securities Law Blog to learn more.

This week we want to talk about changes to regulation crowdfunding. Exempt offerings can be very confusing–there’s Reg D, there’s reg crowdfunding, and other offerings, and almost all of them have special purposes. Regulation Crowdfunding was originally passed into law in April 2012. It took a long time for the SEC to come out with regulations for people to actually be able to use it, and under the original iteration, Regulation Crowdfunding was a special exemption from registration for those raising a hundred thousand dollars or more. That was later raised to a million dollars in 2017, and then in 2020 there were some restrictions removed from Regulation Crowdfunding due to the COVID-19 crisis.

Back in the fall, there was a sweeping change to a lot of the exempt offerings, and regulation crowdfunding limits were raised from an inflationary adjusted one million seventy thousand dollars to five million dollars. So you can do an exempt offering under Reg CF for up to five million dollars. There are several requirements that go along with this, although it’s still best used for startups and people that can easily handle these types of instructions. It’s targeted at crowd funding for sites like Kickstarter, Indiegogo, and the like, so you might want to take a good look at this. There are some other regulations, actually Reg CF was originally intended to sidestep a lot of the state regulations in the beginning, although a lot of the states have been reacting to the 2012 Jobs Act with things like 506c and Regulation A Plus, which has the general solicitation rules involved. So you better check out your local state regulations too, if you decide to pursue Reg CF, because a lot of states would ignore an offering raising a hundred thousand dollars or even 250. They’re not going to ignore regulations regarding an offering of a million or five million dollars, nor should they, so be sure to be mindful of that.

For more on securities law and the regulations surrounding your capital raise efforts, we highly recommend Laura Anthony’s Securities Law Blog. We follow her on weekly basis! As always, if you’re looking to organize a capital raise or there’s any other way we can help you, give us a holler.

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