New York Crowdfunding Event Slides: The JOBS Act


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Slides from Crowdfund Insider's Crowdfunding event held March 13th and co-sponsored by Return on Change. Slides compiled by Samuel Guzik and Georgia Quinn.

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New York Crowdfunding Event Slides: The JOBS Act

  1. 1. Demystifying the JOBS Act: How Startups Can Raise Capital with Crowdfunding Center for Social Innovation March 13, 2014
  2. 2. Meet the Presenters ©2013 Seyfarth Shaw LLP2 | Samuel S. Guzik Richardson Patel LLP CA: (310) 208-1182 NY: (212) 931-8700 Email: @SamuelGuzik1 Georgia Quinn Seyfarth Shaw LLP Direct: (212) 218-5599 Email: @GeorgiaQuinnEsq
  3. 3. Introduction and Overview • Jumpstart Our Business Startups Act of 2012 • Title II – Rule 506(c) – Accredited Crowdfunding a/k/a “Rich Mans’ Crowdfunding” • Title III – Regulation CF – Retail Crowdfunding • Title IV – Regulation A+ - Registered Crowdfunding a/k/a “CrowdfundingPlus ™” • Highlights of each title/regulation then Georgia and Sam coffee talk – Focusing on Practical Use and Outlook • Audience Q&A ©2013 Seyfarth Shaw LLP3 |
  4. 4. Securities Law 101 • What are securities? • Why are they a big deal? • Basic rule - ALL sales of securities are required to be registered under the U.S. securities laws • What is an exemption? • Crowdfunding needs an exemption ©2013 Seyfarth Shaw LLP4 |
  5. 5. • 506(c) aka “accredited crowdfunding” • Eliminated ban on general solicitation • For accredited investors only • Heightened accreditation standards “reasonable steps” • No limits on amount that can be raised – no limits on amount that can be invested • Bad actor disqualification/disclosure - applies to all Titles ©2013 Seyfarth Shaw LLP5 | Title II 506(c) Accredited Crowdfunding
  6. 6. Title III Regulation CF Retail Crowdfunding (proposed) • Regulation CF aka “retail crowdfunding” • Investment Crowdfunding vs. Other Types of Crowdfunding • Federal vs. “Local/State” Crowdfunding • Issuers – U.S. Companies Which are Not “Shells” • Raise is limited to $1M of CF Offerings in a rolling 12 month period • Financial information = GAAP financial statements for past two years; tax returns if raising $100k or <; reviewed if raising > $100k up to $500k; audited if raising > $500k • Form C disclosure document filed with SEC • Ongoing annual disclosure required • Must use online funding portal or broker dealer (to conduct offering and for almost all offering related disclosure) • Securities sold are freely tradeable after one year©2013 Seyfarth offering Shaw LLP6 |
  7. 7. Title III Regulation CF Retail Crowdfunding (cont.) • Investors • Offering made to the general public = Do NOT have to be accredited investors • Investment amount limited to greater of $2k or 5% of annual income or net worth if < $100k; 10% of annual income or net worth if $100k or greater; capped at $100k • Intermediaries • Must register with SEC and FINRA • May not receive equity or other financial interest in issuer as compensation • Funding portal may not “curate” the issuers on its website • Must educate investors and screen for fraud • According to the SEC: Same liability as issuer ©2013 Seyfarth Shaw LLP7 |
  8. 8. Title IV Regulation A+ Registered Crowdfunding (proposed) • Regulation A or Regulation A+ aka “registered crowdfunding” aka “CrowdfundingPlus ™” • Two tiers: • Tier 1 can be used for offering of up to $5M • Tier 2 can be used for offerings of up to $50M • Offering proposed to be open to general public = no accreditation/qualification requirement • May only issue equity, debt, or debt convertible into equity (or guarantees thereof) ©2013 Seyfarth Shaw LLP8 |
  9. 9. Title IV Regulation A+ Registered Crowdfunding (cont.) • “Mini-Registration”: Must file Form 1-A with SEC and receive affirmative approval prior to any sales but may “test the waters” • Audited financials and ongoing disclosure required only for Tier 2 – “Reviewed” financials for Tier 1 • Issuer may only have 500 unaccredited and 2,000 total investors before it must comply with ’34 Act disclosure regime. • Tier 1 offerings are NOT CURRENTLY exempted from state securities (blue sky) regimes/ Track 2 offerings are exempt • Securities issued are freely tradeable 9 ©2013 Seyfarth Shaw LLP
  10. 10. Which Method Works for You?   Accredited Crowdfunding Title II (506(c)) Retail Crowdfunding Title III (Reg. CF) (proposed) Registered Crowdfunding aka CrowdfundingPlus ™ Title IV (Reg. A+) (proposed)  PROS • Unlimited Fundraising  Amount • General Solicitation • No Requisite Financial  Statements/Specified  Disclosure • No Ongoing Disclosure  • Formal SEC Approval Not  Required  • State Preemption • Can Offer to General Public • No Formal SEC Approval  Required • State Preemption • 500 Holder Limit Does Not Apply   • Can Offer Up to $5M or $50M • General Solicitation • Can Offer to General Public • Freely Tradeable Securities • State Preemption for Tier 2 CONS • Only Accredited Investors • Must Take Reasonable Steps  to Ensure that Investors are  Accredited • Restricted Securities • Fundraising Amount Capped at  $1M • Reviewed/Audited Financial  Statements May Be Required  • Ongoing Disclosure • Investment Amount Capped  • Restricted Securities • Audited Financial Statements May  Be Required  • Formal SEC Approval Required • Ongoing Disclosure • Investment Amount Capped • 500 Holder Limit Applies • No State Preemption for Tier 1 10
  11. 11. Q & A 11 ©2013 Seyfarth Shaw LLP