by: Grow VC Group
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At the end of October, the SEC approved Title III of the JOBS Act making it possible for US retail investors to participate in online investing offerings of SMEs in search of equity capital, no matter in which state they are based. However, one could legitimately ask: how will this affect intrastate crowdfunding?

However, now that Title III is implemented and equity crowdfunding is possible at federal level, what will happen to intrastate crowdfunding rules? Well, they will continue to exist and it will still be possible for companies to conduct an offering at intrastate level.

Nevertheless, in the same session that approved Title III, the SEC has also proposed a few amendments to rule 147, which is the basis of intrastate crowdfunding. In particular, the SEC proposed the following points:

  • Eliminate the restriction on offers, while continuing to require that sales be made only to residents of the issuer’s state or territory. This means that with this amendment, it would be possible for companies to reach with their offerings non-resident citizens too, through any mean or media- included the internet and social media -. However the actual sale of share would remain limited to state-resident investors.
  • Refine what it means to be an intrastate offering and ease some of the issuer eligibility requirements in the current rule. In particular, the company does not longer need to be incorporated in the state where it wants to conduct the offering, but it is sufficient that the region is its principal place of business.
  • Limit the availability of the exemption to offerings that are registered in-state or conducted under an exemption from state law registration that limits the amount of securities an issuer may sell to no more than $5 million in a 12-month period and imposes an investment limitation on investors (i.e. intrastate crowdfunding regulations).

The SEC is looking for public comments on these proposed rules until end of December. Should these amendments enter into effect, intrastate crowdfunding would become an easier solution to raise capital. However, one could still ask: why would a company prefer conducting an intrastate crowdfunding offering rather than a federal one? There are probably several answers to this. We can imagine two: one could be that the company wants its investors to be also State residents, so to mitigate NIMBY logics, for example; the other, instead, could simply be that it aims at raising more than $1 million, which is the cap for federal online investing offerings.

Read the whole article and more details on Crowd Valley Blog.

Photo: Wikipedia.

Photo: Wikipedia.


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Grow VC Group The Grow VC Group is the world leading, global pioneer of securities crowd funding, peer to peer marketplaces, new investment models and global business development. Established in 2009, the Group has developed new investment models on six continents and continues to innovate the global market.

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This entry was posted on Tuesday, November 17th, 2015 at 6:00 pm and is filed under Business Updates. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.