On May 13, 2016, the SEC issued new Compliance and Disclosure Interpretations ("C&DIs") on Rules 100 (Crowdfunding Exemption and Requirements), 201 (Disclosure Requirements), 204 (Advertising) and 205 (Promoter Compensation) of Regulation Crowdfunding. Highlights of the C&DIs include the following:
- Information not constituting an offer of securities may be disseminated by an issuer prior to the commencement of an offering.
- The investment limits under Rule 100(a)(2) apply to all investors, including non-natural persons.
- If an offering is conducted during the period from inception until 120 days after reaching the annual balance sheet date for the first time, the issuer must include a balance sheet as of a date in that period, which may be the inception date. For an offering conducted more than 120 days after the issuer's first annual balance sheet date, the date of the most recent annual balance sheet determines the period for which statements of comprehensive income, cash flows and changes in stockholders' equity must be provided.
- An issuer may advertise the "terms of the offering," but any such advertising that is made other than through communication channels provided by the intermediary on the intermediary's platform will be limited to notices that include no more than the information described in Rule 204(b). "Terms of the offering" is defined to include the amount of securities offered, the nature of the securities, the price of the securities and the closing date of the offering period.
- The limitation on advertisement under Rule 204(b) applies only when the advertisement includes any of the "terms of the offering."
- When an issuer is compensating a third party to promote the issuer's offering outside of the intermediary's communication channels, third-party communications need to comply with the notice requirements of Rule 204(b).
The SEC also published its Small Entity Compliance Guide for Crowdfunding Intermediaries, Small Entity Compliance Guide for Issuers and Small Entity Compliance Guide for Funding Portals. In these guides, the SEC summarizes, among other things, the registration and disclosure requirements, prohibited activities and applicable safe harbors for crowdfunding intermediaries and the registration and disclosure requirements, limits on advertising and promoters, restrictions on resales, exemption from Exchange Act Section 12(g) and bad actor disqualification for issuers.
The C&DIs are available at: https://www.sec.gov/divisions/corpfin/guidance/reg-crowdfunding-interps.htm
The Small Entity Compliance Guide for Crowdfunding Intermediaries is available at: https://www.sec.gov/divisions/marketreg/tmcompliance/cfintermediaryguide.htm
The Small Entity Compliance Guide for Issuers is available at: https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051316.htm
The Small Entity Compliance Guide for Funding Portals is available at: https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051316.htm
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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