Two years ago, almost to the day, I went to Washington DC to advocate for equity crowdfunding for the first time. Yesterday, I returned with fellow members of the CFIRA board to Washington for perhaps the 10th time to advocate at the SEC for workable rules for equity crowdfunding, now under Section 4(a)6 of the 1933 Act. Specifically we were advocating for:
- Reduced liability exposure of Portals for Issuer errors/omissions in their offering docs.
- Removing the proposed rule for ongoing annual audited financials for Issuers following a 4(a)6 raise of over $500k.
- Clarity on the timing of requirements for investors to go through a full “opening of an account” with the intermediary. Because officially opening an account requires significant time and necessary steps for the investor, it would limit the number of investors or size of the crowd viewing these deals.
- Allowing for multiple Issuers under common control of a single entity to conduct parallel raises, so long as a standard was met to insure that the structure was being used to fund something more akin to franchises than just multiple investment vehicles into the same company.
- More clarity on the use of automated objective criteria for filters in displaying lists of deals on an intermediary’s platform. The interest here is in separating this from any notion of investment advice or deal curation.
- Clarity on which services the platform intermediaries will be allowed to outsource to 3rd party service providers. As proposed, back office and administrative services are allowed to be outsourced, but we would like more clarity on what qualifies in this arena, as the service provider ecosystem develops.
Today, with the 585 page SEC rule book in hand, we meet to discuss these points. Our overall goal is to make equity crowdfunding workable in practice. Stay tuned for an update on the meeting with the SEC and what the CFIRA board was able to glean from our conversations with the SEC staff.