In the United States, Regulation Crowdfunding (often referred to as “Reg CF”) enables eligible companies to offer and sell securities through crowdfunding.
- require all Reg CF transaction to take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal;
- permit a company to raise a maximum aggregate amount of $5 million annually;
- limit the amount individuals can invest annually across all crowdfunding offerings; and
- require disclosure of substantive narrative business and financial information about the company in filings with the SEC and to investors and the intermediary facilitating the offering.
Securities purchased in Reg CF offerings generally cannot be resold for one year, unless the securities are transferred:
- back to the company
- to an “accredited investor”;
- as part of an offering registered with the SEC; or
- to a family member of the purchaser or in other similar and limited circumstances.
With the exception of accredited investors, individual investors are limited in the amounts they are allowed to invest in all Reg CF offerings annually:
- If either of an investor’s annual income or net worth is less than $107,000, then the investor’s investment limit is the greater of:
- $2,200 or
- 5 percent of the lesser of the investor’s annual income or net worth.
- If both annual income and net worth are equal to or more than $107,000, then the investor’s limit is 10 percent of the greater of their annual income or net worth.
Before filing the Form C, companies are now permitted to “test the waters” or rather gather indications of interest in a contemplated Reg CF offering.
You may also be interested in reading our high-level overview on Regulation A (aka “Reg A” or “Reg A+) and Intrastate Securities offerings.