The SEC has released answers to FAQs about the crowdfunding provisions of the JOBS Act. Their answers signal a few things and may foretell others.
- They make several references to their authority to add regulations, so we can safely assume they are planning to do so (as many have predicted already).
- They reiterate that any solicitation, equity crowdfunding portal, or crowdfunding investment is illegal until they have released their rules and platforms have become compliant with them.
- They make reference at the bottom to a provision of the JOBS Act that states how crowdfunding intermediaries must “make efforts to ensure that no investor in a 12-month period has purchased crowdfunded securities that, in the aggregate, from all issuers, exceed the investment limits set forth in section Title III of the JOBS Act.” This is straight from the law, but we’re hoping that the “take efforts” part is interpreted as self-reporting on the part of the investor, as opposed to a complex crowdfunding industry database to track all investors and their investments.
- The FAQs also point to the SEC’s clear intention to create a standard by which “funding portals” must register with the SEC and (most-likely) FINRA. Word on the street is that this will be a watered down version of Broker/Dealer registration. If Broker/Dealer registration does serve as the model, then we’ll see plenty of work and certification requirements for the funding portals. Some have said that it may make sense to simply meet the Broker/Dealer standards and get the added benefits of being a Broker/Dealer. We’ll see.
- To that point, the SEC reiterates the stipulations in the law that clearly limit certain activities of the “funding portals” vs. full fledged Broker/Dealers.
Check out the answers to the FAQs yourself here.