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Issuer Requirements

  1. Issuer cannot exceed $1,070,000 during a 12-month period commencing with offer or sale. §227.100(a)(1).
  2. Issuer must disclose certain information. §227.201.
  3. Issuer must file with the SEC, and post on the issuer's website, an annual report and certified financial statements. §227.202 & §227.203.
  4. Issuer may not, directly or indirectly, advertise the terms of an offering. §227.204. # *Should we mention the exception in 227.204(b)? "The issuer may direct investors to the intermediary's platform...
  5. The issuer can compensate a promoter through communication channels provided by an intermediary on the intermediary's platform, but only if the issuer or person acting on behalf of the issuer takes reasonable steps to ensure that the person promoting the offering clearly discloses the receipt, past or prospective, of such compensation with any such communication. §227.205

Intermediary Requirements

  1. Must be registered with the commission as a broker under section 15(b) or as a funding portal per §227.400. §227.300(a)(1).
  2. Must be a member of a national securities association (FINRA). §227.300(a)(2).
  3. Directors, officers, and/or partners cannot have a financial interest in an issuer using the intermediary's platform. §227.300(b).
  4. The intermediary, as a business entity, may have a financial interest in the issuer if (1) the intermediary receives the financial interest as compensation for services connected to use of the intermediary's platform; and (2) the compensation consists of securities of the same class, terms, conditions, and rights that are being offered to the general public through the intermediary's platform. §227.300(b)(1) & (2).
  5. Funding portals are not allowed to do the following: (i) Offer investment advice or recommendations; (ii) Solicit purchases, sales, or offers to buy the securities displayed on its platform; (iii) Compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its platform; or (iv) Hold, manage, possess, or otherwise handle investor funds or securities. §227.300(c)(2)
  6. An intermediary must perform certain measures to reduce fraud. §227.301.
  7. An intermediary must require investors to open an account on the intermediary's platform. §227.302(a)
  8. When establishing an account for an investor, an intermediary must clearly disclose the manner in which the intermediary is compensated in connection with the offering. §227.302(d)
  9. When establishing an account for an investor, an intermediary must inform the investor that any promoter who receives compensation must clearly disclose in all communications on the intermediary's platform the receipt of compensation and that he or she is engaging in promotional activities on behalf of the investor. §227.302(c)
  10. An intermediary must provide educational materials to the investor. §227.302(b)
  11. An intermediary must provide certain information in respect to transactions to the SEC and the general public. §227.303.
  12. An intermediary must allow an investor to cancel an investment commitment for any reason until 48 hours prior to the deadline identified in the issuer's offering materials. §227.304(a).
  13. The offering may close early, if certain conditions are met. §227.304(b)
  14. If there's a material change to the terms of an offering, the intermediary must give certain notice within a certain time period. §227.304(c). If the material change occurs within five business days before the closing of an offering, the offering must be extended to allow for a period of five business days for the investor to reconfirm his or her investment. §227.304(c)(2)
  15. An intermediary is prohibited from paying a third party for personal information about investors or potential investors. §227.402(b)(6)
  16. A funding portal must register with the SEC by filing a Form Funding Portal. §227.400 & §249.2000.
  17. The registration will be effective the later of: (1) Thirty calendar days after the date that the registration is received by the SEC; or (2) The date the funding portal is approved for membership by a national securities association (FINRA). §227.400
  18. A funding portal must implement written policies and procedures reasonably designed to achieve compliance with federal securities laws, comply with the requirements of Part 248 involving privacy, and permit the examination and inspect of all business and business operations by the SEC. §227.403.
  19. A funding portal must make and keep certain records. §227.404.

Securities Requirements

  1. The security cannot be transferred by any purchaser during a one-year period from when the security was issued except if the security is transferred: (a) To the issuer of the securities, (b) To an accredited investor, (c) As part of an offering registered with the SEC; or (4) To a member of the family (defined in §227.501(c) of the purchaser or equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of the member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchase or similar circumstance. §227.501