FINRA Issues Crowdfunding Rules

Securities Lawyer 101 l DTC Eligibility
Securities Lawyer 101 Blog

The Financial Industry Regulatory Authority (“FINRA”) has issued a voluntary form for prospective crowdfunding portals under the Jumpstart Our Business Startups Act (“JOBS Act”), signed in April 2012 by President Obama.

Anyone who intends to set up a crowdfunding portal for individual investments in start-up companies can voluntarily submit information to FINRA, which FINRA will use in drafting rules governing crowdfunding portals. The form is not definitive; FINRA will not adopt its final form until the SEC has adopted its own crowdfunding funding portal rules. The JOBS Act requires the Securities and Exchange Commission (the “SEC”) to formulate rules to implement the new exemption that will allow crowdfunding.

When this will occur is unclear since the SEC has missed its December 31, 2012 legally mandated deadline. The JOBS Act gave the SEC 270 days to create its crowdfunding rules, which set the deadline at December 31.

Until the SEC creates its rules, any offers or sales of securities purporting to rely on the crowdfunding exemption would be unlawful under federal securities laws.

FINRA issued a statement concerning the voluntary form for funding portals: “FINRA is committed to ensuring that the capital-raising objectives of the JOBS Act are advanced in a manner consistent with Congressional intent and investor protection.”

FINRA Crowdfunding Form

The FINRA crowdfunding portal form requires applicants to disclose, among other things, whether any of the principals of the portal have been accused of securities violations or serious crimes.

The information provided at this stage will not be binding and FINRA will treat the information as confidential.

The form also asks prospective portals to provide information about:

♦ ownership;

♦ funding;

♦ management; and

♦business model and relationships.

“Crowdfunding portals that file this form will provide FINRA with important information regarding portal business models, which will inform our rule-making,” Thomas Selman, FINRA’s executive vice president for regulatory policy, said in a statement.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com