Course 4:More on Equity Crowdfunding in US and Title III of the JOBS Act
Restrictions on Resales
Investments made in a Title III crowdfunding transaction can't be resold for a period of one year, except when transferred:
Equity Crowdfunding Intermediaries
Under Title III of the JOBS Act, a company would be required to conduct its offering through an equity crowdfunding intermediary, which needs to be registered as a broker-dealer or a funding portal with the U.S. Securities and Exchange Commission (SEC), and become a member of FINRA.
Disclosure by companies
Title III of the JOBS Act imposes specific disclosure requirements on issuers regarding their business and the securities offering. Companies are required to file certain information with the SEC and provide this information to investors.
As an investor, you are highly recommended to read the disclosure materials before you invest
Click HERE for more information regarding disclosure by companies.
Under Title III of the JOBS Act, SEC requires a company which raises fund in a crowdfunding intermediary to disclose:
Exceptions/Termination of Ongoing Reporting Requirement
Investors should be aware that an issuer will no longer be required to file an annual report if the earliest of the following events occurs:
(1) the issuer is required to file reports under Exchange Act Sections 13(a) or 15(d);
(2) the issuer has filed at least one annual report and has fewer than 300 holders of record;
(3) the issuer has filed at least three annual reports and has total assets that do not exceed $10 million;
(4) the issuer or another party purchases or repurchases all of the securities issued pursuant to Section 4(a)(6), including any payment in full of debt securities or any complete redemption of redeemable securities; or
(5) the issuer liquidates or dissolves in accordance with state law.
What is an Escrow in Equity Crowdfunding?
Because a funding portal cannot receive any funds and hold securities for investors, all investment money or securities are held in an escrow account. Escrow is a trustee, qualified pursuant to FINRA rules, who on behalf of an issuer and investors participating in an offering holds funds and maintains the escrow ownership ledger. The Trustee is required to holds such funds in an account at a US Federally insured bank.
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