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June 1, 2016Joan MacLeod Heminway
Crowdfunding and the Public/Private Divide in U.S. Securities Regulation
The origination and expansion of crowdfunding as a capital-raising tool has been a hot topic on the street and in the media and the academy for a few years now. In less than ten years, this fusion of social media and traditional corporate finance—a mode of corporate finance through which firms raise investment capital by reaching out over the Internet to a broad, undifferentiated mass of potential investors—grew from a creative impulse to a movement that catalyzed federal legislative action. Its socio-legal bounds are as yet relatively untested. It seems that crowdfunding offers something to nearly everyone.
March 13, 2015Carol Bavousett Mattick
Crowdfunding from Texas Crowds
The Texas Intrastate Crowdfunding Rules have flexibility that neither the comparable federal statute nor the proposed federal rulemaking have. The Texas rules allow all of the intermediaries operating crowdfunding portals to take compensation. That should encourage the formation of portals and registration with the Texas State Securities Board. In contrast, the definitions and operational limits on both federal Funding Portals and intermediaries in Rule 506(c) offerings exempted under ’34 Act Section 3(h) cannot take compensation. The Texas issuer’s offering exemption provides for a larger ceiling for the investment by each individual investor and has no ceiling on investments by Accredited Investors. In contrast, federal statutory provisions for crowdfunding offerings have ceilings, whether the investors are Accredited Investors or not and all investors must be Accredited Investors in Rule 506(c) offerings made on portals. The Texas rules will likely disqualify fewer issuers than the federal statutory provisions for crowdfunding or the regulatory requirements for Rule 506(c) offerings do. And, the simpler set of disqualifying events or conditions under Texas rules impose a lesser burden in ensuring compliance with the exemption than exists under the federal exemptions.