New York Crowdfunding Event Slides: The JOBS Act
11
Demystifying the JOBS Act: How Startups Can Raise Capital with Crowdfunding Center for Social Innovation March 13, 2014
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Slides from Crowdfund Insider's Crowdfunding event held March 13th and co-sponsored by Return on Change. Slides compiled by Samuel Guzik and Georgia Quinn.
Transcript of New York Crowdfunding Event Slides: The JOBS Act
Demystifying the JOBS Act:
How Startups Can Raise Capital with
CrowdfundingCenter for Social Innovation
March 13, 2014
Meet the Presenters
©2013 Seyfarth Shaw LLP2 |
Samuel S. Guzik
Richardson Patel LLPCA: (310) 208-1182NY: (212) 931-8700
Email: [email protected]
@SamuelGuzik1
Georgia Quinn
Seyfarth Shaw LLP
Direct: (212) 218-5599
Email: [email protected]
@GeorgiaQuinnEsq
Introduction and Overview
• Jumpstart Our Business Startups Act of 2012
• Title II – Rule 506(c) – Accredited Crowdfunding a/k/a “Rich Mans’ Crowdfunding”
• Title III – Regulation CF – Retail Crowdfunding
• Title IV – Regulation A+ - Registered Crowdfunding a/k/a “CrowdfundingPlus ™”
• Highlights of each title/regulation then Georgia and Sam coffee talk – Focusing on Practical Use and Outlook
• Audience Q&A
©2013 Seyfarth Shaw LLP3 |
Securities Law 101
• What are securities?
• Why are they a big deal?
• Basic rule - ALL sales of securities are required to be registered under the U.S. securities laws
• What is an exemption?
• Crowdfunding needs an exemption
©2013 Seyfarth Shaw LLP4 |
• 506(c) aka “accredited crowdfunding”
• Eliminated ban on general solicitation
• For accredited investors only
• Heightened accreditation standards “reasonable steps”
• No limits on amount that can be raised – no limits on amount that can be invested
• Bad actor disqualification/disclosure - applies to all Titles
©2013 Seyfarth Shaw LLP5 |
Title II 506(c) Accredited Crowdfunding
Title III Regulation CF Retail Crowdfunding (proposed)
• Regulation CF aka “retail crowdfunding”• Investment Crowdfunding vs. Other Types of Crowdfunding• Federal vs. “Local/State” Crowdfunding
• Issuers – U.S. Companies Which are Not “Shells”
• Raise is limited to $1M of CF Offerings in a rolling 12 month period
• Financial information = GAAP financial statements for past two years; tax returns if raising $100k or <; reviewed if raising > $100k up to $500k; audited if raising > $500k
• Form C disclosure document filed with SEC
• Ongoing annual disclosure required
• Must use online funding portal or broker dealer (to conduct offering and for almost all offering related disclosure)
• Securities sold are freely tradeable after one year©2013 Seyfarth offering Shaw LLP6 |
Title III Regulation CF Retail Crowdfunding (cont.)
• Investors• Offering made to the general public = Do NOT have to be
accredited investors • Investment amount limited to greater of $2k or 5% of annual
income or net worth if < $100k; 10% of annual income or net worth if $100k or greater; capped at $100k
• Intermediaries• Must register with SEC and FINRA• May not receive equity or other financial interest in issuer as
compensation• Funding portal may not “curate” the issuers on its website• Must educate investors and screen for fraud• According to the SEC: Same liability as issuer
©2013 Seyfarth Shaw LLP7 |
Title IV Regulation A+ Registered Crowdfunding (proposed)
• Regulation A or Regulation A+ aka “registered crowdfunding” aka “CrowdfundingPlus ™”
• Two tiers: • Tier 1 can be used for offering of up to $5M • Tier 2 can be used for offerings of up to $50M
• Offering proposed to be open to general public = no accreditation/qualification requirement
• May only issue equity, debt, or debt convertible into equity (or guarantees thereof)
©2013 Seyfarth Shaw LLP8 |
Title IV Regulation A+ Registered Crowdfunding (cont.)
• “Mini-Registration”: Must file Form 1-A with SEC and receive affirmative approval prior to any sales but may “test the waters”
• Audited financials and ongoing disclosure required only for Tier 2 – “Reviewed” financials for Tier 1
• Issuer may only have 500 unaccredited and 2,000 total investors before it must comply with ’34 Act disclosure regime.
• Tier 1 offerings are NOT CURRENTLY exempted from state securities (blue sky) regimes/ Track 2 offerings are exempt
• Securities issued are freely tradeable
9 ©2013 Seyfarth Shaw LLP
Which Method Works for You?
Accredited Crowdfunding
Title II (506(c)) Retail Crowdfunding
Title III (Reg. CF) (proposed)
Registered Crowdfunding aka CrowdfundingPlus ™
Title IV (Reg. A+) (proposed)
PROS
Unlimited Fundraising Amount
General Solicitation
No Requisite Financial Statements/Specified Disclosure
No Ongoing Disclosure
Formal SEC Approval Not Required
State Preemption
Can Offer to General Public
No Formal SEC Approval Required
State Preemption
500 Holder Limit Does Not Apply
Can Offer Up to $5M or $50M
General Solicitation
Can Offer to General Public
Freely Tradeable Securities
State Preemption for Tier 2
CONS
Only Accredited Investors
Must Take Reasonable Steps to Ensure that Investors are Accredited
Restricted Securities
Fundraising Amount Capped at $1M
Reviewed/Audited Financial Statements May Be Required
Ongoing Disclosure
Investment Amount Capped
Restricted Securities
Audited Financial Statements May Be Required
Formal SEC Approval Required
Ongoing Disclosure
Investment Amount Capped
500 Holder Limit Applies
No State Preemption for Tier 110
Q & A
11 ©2013 Seyfarth Shaw LLP
