by: Corey Schwartz

Crowdfunding Title III: The good, the bad and the ugly

Like many of our friends throughout the crowdfunding industry, we have been watching with bated breath to see if or when the final SEC Title III crowdfunding rules and the FINRA amended rules will be approved.  The SEC voted on Friday October 30, 2015 to approve the proposed rules in a 3-1 vote with Commissioner Piwowar being the only dissenting vote.


Signed into law by President Obama on April 5, 2012 the JOBS Act (Jumpstart Our Business Startups Act),  created a framework to allow smaller business and startups to access capital from non-accredited investors without having to go public.  “This is a very complex change in the way the SEC thought about itself and its duty to protect the unsophisticated consumer”, said Corey Schwartz of, a company that will crowdfund residential mortgages.  It took the Commission just over 4 years to write the rules and approve them.  They worked diligently to make crowdfunding easier for the people trying to get businesses going.  A few examples of their efforts to make crowdfunding easy include:

  • Not requiring companies doing less than $100,000 of fund raising to get audited financial statements.  This saves companies at least $5,000 in accounting fees.
  • Allowing crowdfunding portals to vet the companies they list on their platforms
  • Allowing portals to take financial interests in the companies they list


This vote begins a new era of allowing the public to fund early stage companies, an area that was once confined to the hallowed halls of Palo Alto, yet it is not without its pitfalls.  For example, the new rules require that Crowdfunding Portals register with FINRA and create a new form of broker-dealer, with all the regulations and requirements that most other broker-dealers have to comply with.  This isn’t a free ride.  In tomorrow’s post, I’ll start to detail the good, the bad, and the ugly of the new rules as we understand them today.  For those of you that enjoy reading, here are just under 700 pages of rules, regulations and forms to pour through until tomorrow’s post:

Title III of the Jobs Act

1. SR-FINRA-2015-040:
a. Adopt Funding Portal Rules 100,110,200, 300, 800,900 and 1200 and related forms.
b. Adopt FINRA rule 4518: Notification to FINRA in Connection with the JOBS Act.

2. SR-FINRA-2015-041: Adopt Section 15 of Schedule A to the FINRA By-Laws governing fees for funding portals that are FINRA Members.

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