Michigan Embraces Crowdfunding
Posted by Brenda Hamilton, Securities and Going Public Lawyer
Michigan recently made a move to assist Michigan small businesses with their investment crowdfunding endeavors. Michigan became the first state to establish an intrastate market where broker-dealers can sell securities of Michigan-based companies using crowdfunding. The signing of House Bill 5273 by Michigan’s preexisting intrastate exemption from securities registration known as the Michigan Invests Locally Exemption (“MILE Act”), allows Michigan businesses to raise capital using the Internet and/or though general solicitation by selling the exempt securities within a newly-created alternative intrastate market.
In order to offer and sell securities in reliance on the new exemption provided by House Bill 5273, certain requirements must be met. This includes the requirement that a “Michigan Investment Market” facilitate the sale of exempt securities on behalf of the issuer. Michigan Investment Markets are permitted to charge fees of up to 5% of the transaction’s value.
A broker-dealer who desires to be a Michigan Investment Market must register with the state of Michigan. This requires that the broker-dealer submit an application, consent to service of process, pay required fees, and provide other information. Each application is subject to a sixty-day public comment period. At the end of the comment period, the state may approve, limit, or deny the Michigan Investment Market’s registration.
Once a broker-dealer is approved to be a Michigan Investment Market they must comply with ongoing requirements. These include that the Michigan Investment Market be a Michigan resident and only conduct business in Michigan.
Each Michigan Investment Market is required to maintain detailed information of all transactions for at least seven years. Additionally, before any secondary offer, sale, purchase or trade of the crowdfunded securities, certain information about the company’s management and financial condition must be provided to investors within a reasonable amount of time prior to the investment.
Other states have passed legislations requiring registration of website operators and crowdfunding portals. For example, the Texas intrastate crowdfunding exemption requires that offers and sales be made exclusively through an Internet website operated by a Texas registered general dealer or Texas registered crowdfunding portal. Michigan is the first to create an intrastate market for broker dealers.
Michigan’s new legislation demonstrates the consistent efforts by the states to stimulate capital for small businesses. Presently at least fourteen states have passed intrastate crowdfunding and many states have proposals pending.
For further information about broker dealer registration and securities law, please visit www.securitieslawyer101.com or contact Brenda Hamilton, Securities Attorney, 101 Plaza Real South, Suite 201 S, Boca Raton, Florida, 33432, at (561) 416-8956 or by email at [email protected]. This information 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 and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCMarkets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings, please contact Hamilton and Associates at (561) 416-8956 or[email protected]. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Going Public Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
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