Three things the SEC would like you to know right now

As we all know, the SEC is in the process of putting together its crowdfunding rules. Various people have been in to chat with the Staff about life, the Nats and oh by the way would you mind not regulating this thing I’m planning to do?

In the course of those discussions, the SEC has been reminding folks of some basic elements of securities regulation that have not changed and will not change with the implementation of the crowdfunding exemption under Section 4(6) of the Securities Act.

One. If you are acting as a stock exchange, you need to register as a stock exchange or an alternative trading system of some kind. Whether you call it a liquidity platform or a secondary crowdfunding marketplace or Elvis the Buttonwood Tree, if it looks like a place where people come to buy and sell securities, it may need to be registered with the SEC and there is no exemption to be found in the Securities Act. Get a lawyer.

Two. If you are sharing revenue with a regulated entity you may end up needing to get regulated yourself. So if you sell some service to a crowdfunding portal and they pay you on the basis of the amount of money they receive from the transactions on their portal, you may have a problem. Get a lawyer.

Three. Selectivity with respect to investment opportunities may be deemed investment advice. So “deal of the week,” while harmless on a donation crowdfunding site or at Whole Foods, may be a problem with 4(6) deals, unless you are registered as an investment advisor. So . . . you know the deal. (And, as always, we aren’t your lawyers.)

Join CrowdCheck

More Blogs