REGULATION CROWDFUNDINGOpening Online Investment to the Masses

OVERVIEW FOR REGISTRATION EXEMPTION SECTION 4(A)(6)

Maximum exemption per issuer: $1 million No limit on the types of securities that may be issued

No resale allowed for first 12 months All issuers must operate through one single registered

intermediary (“funding portal”) Financial viability qualifications placed on investors Exemptions preempt state regulations (though states retain

enforcement rights)

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ISSUER RESTRICTIONS

Qualified issuers must have less than $25 million in total assets Annual Reporting Requirements: must file within 120 days after the end of

the fiscal year being reported Issuers surpassing this are granted a two-year transition period to register

the exempted securities Companies that can’t claim exemption: blank-check, foreign, SEC

reporting, and certain investment companies Further disqualification to issuers with criminal records, bad standing

with certain financial organizations, or fraudulent history 4(c)(6) offerings are not integrated with other concurrent exemptions

(e.g. Federal Rule 506(c)) However, subject to the stricter regulations of each

May not advertise offering terms Public “notice” permissible with strictly limited content

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ISSUERS: REQUIRED DISCLOSURES

Name, position/occupation, last 3 years business experience, and all other business/corporate involvement for directors, officers, and large (20%+) shareholders

Description of the business and its business plan Price of securities, fundraising target and limit, deadline, intended

use of proceeds and oversubscription funds Financial report and structure of the organization

Most recent tax returns and financial statements (offerings <$100k), financial statements reviewed by a public accountant (between $100k and $500k), or financial statements audited by a public accountant (>$500k)

Any compensation given to intermediary

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INTERMEDIARIES

Must register with a registered securities agency (currently FINRA) Multiple domains allowed under single registration

Registration as “funding portal” more restrictive than broker/dealer but with fewer qualifications

May not solicit, offer advice, or handle investor funds/securities May only conduct business with investors online

No federally required licensing, testing, or qualifications Cannot have a financial interest in issuers (except disclosed fair

compensation) Must have “reasonable basis for belief” that issuers are complying with

regulations (not required due diligence)

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INTERMEDIARIES: OBLIGATIONS WITH INVESTORS

Must conduct Risk Acknowledgement: Educational materials on investing, risks, and investors’ rights Qualifying questionnaire about risks Require investors to open accounts before committing to

investments Must clearly display required disclosures Must provide online communication channel (e.g. discussion

boards)

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INTERMEDIARIES: DISCUSSION BOARDS

Required to have communication channels on portal Posts must be visible to general public Must have a registered account to post

Issuers and compensated promoters may post if disclosing their identity and position with each post

Funding portals may only post discussion guidelines

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INVESTORS

No experience or accreditation required However, must read provided educational materials and

demonstrate understanding of risk Maximum investments in 12 month period range from $2k-

100k Income <$100k: Between $2k-5k Income >$100k: 10% of net worth or annual income (lesser) Maximum for any one investor: $100,000

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Have Questions?

If you have questions about any aspect of the law, or other compliance or regulatory issues your business faces, cull us at The Moore Firm. We are here to Solve Business Problems.

Call (858) 888-5570