Title III Crowdfunding Refresher
Understanding Title III of the JOBS Act
Owning a crowdfunding portal is like having your own NYSE, NASDAQ or OTC exchange. Despite some obvious key distinctions, such as the number of securities listed, they are conceptually the same. It is a place where investors may come to view offerings of securities. In the case of crowdfunding portals, this most often means real estate investments or equity in startups, but the possibilities are virtually limitless.
The distinctions come as benefits to both the portal owner and the participants. For example, a portal owner can hand pick the offerings allowed on the portal so that only high quality deals are showcased. Because portal owners are able to vet and therefore control the deals they list, they have power to target the deals/securities around a specific industry or audience.
A further benefit to both portal owners and investors is that crowdfunding portals, under Title III of the JOBS act regulating equity crowdfunding for non-accredited investors (the other 97% of US citizens), will allow the offering of and participation in “private placements” (investments not typically open to the general public). The SEC votes on the final rules tomorrow.
Until now, US-based crowdfunding portals have been a place where only accredited investors (wealthy individuals or institutions) could participate in listed deals. This has taken place under Title II of the JOBS act or “Reg D” where both 506(b) which bans general solicitation or advertising and 506(c) which allows for general solicitation or social sharing are options. Even with 506(c) deals however, the investor must be accredited and meet strict requirements. Title IV or “Reg A+” allows for non-accredited investors i.e. the general public to participate but carries heavy regulations and filing requirements. For this reason, it’s being called the “mini-IPO.”
Keep in mind that “crowdfunding portal” as discussed in this article refers to equity or securities crowdfunding portals – not the rewards-type portals like Kickstarter or the donation/cause-type portals which are unregulated. While most recognize there is great opportunity in equity crowdfunding, e.g. better investments and new ways of raising capital, many don’t know where to go. Some funding portals will compete over investors while others will seek out and find their own niche. The question then carries over to those companies or organizations looking to have their own crowdfunding portal. Where can they find a white-label portal provider to power their portal and what should they look for in a provider?
That’s where CrowdEngine comes in. CrowdEngine has been built with the anticipation of and belief in equity crowdfunding for the masses. With over 150 portals launched to date, CrowdEngine has developed the stability of an enterprise white-label solution and refined a powerful set of features and tools based off of real data in the market and not just speculation.
Check back after the vote to see just how CrowdEngine will work with the new laws and what you need to do in order to launch a crowdfunding portal of your own.