Course 4:More on Equity Crowdfunding in US and Title III of the JOBS Act
Investments made in a Title III crowdfunding transaction can't be resold for a period of one year, except when transferred:
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 and Ongoing Reporting by Issuers
Title III of the JOBS Act imposes specific disclosure requirements on issuers regarding their business and the securities offering. Issuers are required to file certain information with the SEC and provide this information to investors.
You are highly recommended to read the disclosure materials of an issuer before you invest. You should also pay attention to the ongoing reporting by the issuer if you become an investor of the issuer.
Click HERE for more information regarding disclosure and ongoing reporting by issuers.
Disclosure by IssuersExceptions/Termination of Ongoing Reporting Requirement
Under Title III of the JOBS Act, SEC requires a company which raises fund in a crowdfunding intermediary to disclose:
(a) A company that has offered and sold securities in reliance on Regulation Crowdfunding and in accordance with section 4A of the Securities Act (15 U.S.C. 77d-1) and must file with the Commission and post on the company's Web site an annual report along with the financial statements of the company certified by the principal executive officer of the company to be true and complete in all material respects and a description of the financial condition of the company. If, however, a company has available financial statements that have either been reviewed or audited by a public accountant that is independent of the company, those financial statements must be provided. The annual report also must imust be filed in accordance with the requirements of Regulation Crowdfunding and the Form C and no later than 120 days after the end of the fiscal year covered by the report.
(b) A company that has offered and sold securities in reliance on Regulation Crowdfunding and in accordance with section 4A of the Securities Act (15 U.S.C. 77d-1) must continue to comply with the ongoing reporting requirements until one of the following occurs:
Investors should be aware that a company will no longer be required to file an annual report if the earliest of the following events occurs:
(1) the company is required to file reports under Exchange Act Sections 13(a) or 15(d);
(2) the company has filed at least one annual report and has fewer than 300 holders of record;
(3) the company has filed at least three annual reports and has total assets that do not exceed $10 million;
(4) the company 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 company liquidates or dissolves in accordance with state law.
Ongoing Relationship Between an issuer and Mr. Crowd
Investors must be aware that following completion of an offering conducted through Mr. Crowd, there may or may not be any ongoing relationship between the issuer and Mr. Crowd.
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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