Crowdfunding Under The JOBS Act - Title III
Updated – March 21, 2016
By David M. Freedman and Matthew R. Nutting
Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 allows all investors, regardless of income or net worth, to invest in startups and growing private companies. Title III offerings may be listed only through intermediaries known as funding portals and broker-dealer platforms that are registered with the Securities and Exchange Commission.
The purpose of the JOBS Act was to make it easier and less costly for entrepreneurs, startups, and small businesses (issuers) to raise capital from investors and lenders. Capital is needed to fuel growth, and thereby to boost the economy and create new jobs. The act aims to accomplish that objective mainly by loosening some of the most onerous restrictions on the ability of small companies to raise capital in the private securities markets.
Title III of the JOBS Act was implemented in October 2015 when the SEC issued rules for (a) issuers of securities under Title III, (b) the operation of crowdfunding portals and broker-deal platforms, and (c) the amount of money that people can invest in Title III offerings based on their income and net worth. The SEC refers to this set of rules as “Regulation CF.”
The best summary available, covering Title III and the SEC rules thereunder, can be found on the CrowdCheck website at http://bit.ly/1XE8c44. Crowdcheck is a due diligence and compliance advisory firm based in Virginia. Sara Hanks, the CEO of CrowdCheck, is a securities lawyer and the co-chair of the SEC Advisory Committee on Small and Emerging Companies [https://www.sec.gov/info/smallbus/acsec.shtml].
Title III of the JOBS Act (the “Crowdfunding Exemption”): the full text in PDF format
SEC final rules under Title III published in the Federal Register in November 2015. This is a 685-page PDF document:
Summary of the SEC final rules under Title III published by the Morrison & Foerster law firm:
— David M. Freedman has worked as a financial and legal journalist since 1978. He is a frequent contributor to Accredited Investor Markets, and participates as a panelist and moderator in various Financial Poise Webinars for investors. Matthew R. Nutting is a corporate lawyer with Coleman & Horowitt in Fresno, CA. He advises entrepreneurs, investors, and intermediaries on all aspects of rewards- and securities-based crowdfunding. Freedman and Nutting are the authors of “Equity Crowdfunding for Investors: A Guide to Risks, Returns, Regulations, Funding Portals, Due Diligence, and Deal Terms” (Wiley & Sons, 2015).