Communicating with Your Investors or “Backers”
As has been discussed elsewhere in this book, Title II of the Jumpstart Our Business Startups (JOBS) Act has passed, yet Title III—which gives ordinary, nonaccredited investors the ability to invest in private offerings (i.e., equity crowdfunding)—is still in the works. Predictions about when those regulations will go into effect abound, but it could be a while. It took nearly a year from the time the Title II rules were released to the time they were implemented, and in the case of Title II, all the Securities and Exchange Commission (SEC) was doing was lifting a previously imposed ban on general solicitation.
General solicitation and the rules governing a company's ability to advertise a fundraising transaction can be confusing. To shed some light on this subject I reached out to Doug Ellenoff, who is a partner at the law firm of Ellenoff, Grossman and Schole, and Sara Hanks, chief executive of CrowdCheck.
Doug is a veteran securities attorney and due to his expertise within the emerging crowdfunding industry, he regularly attends meetings with the SEC and Financial Industry Regulatory Authority (FINRA) in order to discuss the proposed rules and implementation issues. He is a board observer to the Crowdfunding Intermediary Regulatory Advocates (CFIRA) and additionally, he represents many portals in the crowdfunding industry.
Doug advises issuers and their advisers to be diligent when facilitating ...