Crowdfund Intermediary Regulatory Advocates (CFIRA) will hold a symposium in Washington, DC on July 13, 2012 to bring together lawmakers, regulators, and crowdfunding advocates. As the leading advocacy group for the crowdfunding industry, CFIRA invites these key constituents to come together and discuss the rules that will govern equity crowdfunding under the JOBS Act.
The JOBS Act, formally known as the Jumpstart Our Business Startups Act, became law on April 5, 2012, and opened the door for equity crowdfunding. The JOBS Act will enable small businesses to offer up to $1 million in equity to small investors through online crowdfunding portals. The JOBS Act gives the Securities & Exchange Commission (SEC) 270 days from April 5, 2012, to create rules that will govern equity crowdfunding. CFIRA is inviting key lawmakers who were instrumental in the passage of the JOBS Act, the SEC, and representatives from the Financial Industry Regulatory Authority (FINRA) to participate in the symposium.
“We want to have communication between the regulatory agencies [SEC and FINRA], the leaders of this industry and Congressmen behind the crowd funding bill.” said David Drake of The Soho Loft; a founding Executive Board Member of CFIRA and a strong supporter of the symposium.
“We want to bring together regulators and legislators so they can build out the detailed regulatory framework for crowdfunding,” said Freeman White, a member of CFIRA’s Executive Committee and CEO of Launcht. “The symposium is to help the SEC and FINRA continue their coordination and for the congressional sponsors of the JOBS Act to reiterate the legislative intent for the JOBS Act.”
Earlier this week, CFIRA’s regulatory team met with members of the SEC to identify and review key issues in formulating regulations for crowdfunding. Key topics and developments included:
A review of CFIRA’s suggestions on how issuers can advertise investment offerings using Facebook, Twitter, and other social media tools, which the SEC agreed to review. On May 21, 2012, CFIRA provided the SEC with recommendations on such solicitations; that letter can be reviewed at http://www.cfira.org/?p=168.
The right for crowdfunding portals to refuse certain offerings, such as offers that may involve unlawful products, or offers that violate a portal’s policies, like offers that may involve pornographic goods or services. Under discussion is a proposal that funding portals may refuse certain offers if the portal notifies users in advance of its criteria.
Criteria that the crowdfunding portal may use to identify fraud.
Whether the rule-making process and the crowdfunding provisions of the JOBS Act should apply to peer-to-peer lending and debt-based securities.
CFIRA’s proposal that search functionality on a funding portal, such as when users may search for offers related to a particular industry or business category, should not be deemed a form of investment advice.
What advice crowdfunding portals may give to issuers who might post offerings on crowdfunding portals.
CFIRA’s proposal that funding portals should be permitted to rely on representation and warranties that investors comply with the JOBS Act. CFIRA and the SEC also discussed the possibility of providing additional safe harbors to funding portals that voluntarily participate in a data program in which portals can verify an investor’s compliance with the law.
CFIRA agreed to follow up on the SEC’s request for more input to discuss clearing and settlement procedures in closing crowdfunding transactions on funding portals. “To be clear, CFIRA’s role for the next 190 days of the 270-day rule-making period is, specifically, to serve as a voice of the industry with the appropriate regulators and to provide continuing regulatory education to the industry,” said Candace Klein, chair of CFIRA and founder of SoMoLend.com, a debt-based crowdfunding platform.
This week, CFIRA also urged members of the industry to provide assurance that their crowdfunding portals do not inadvertently—or prematurely—make equity offerings via a crowdfunding platform until the SEC adopts its rules. “CFIRA is committed to working with the SEC during the rule-making process and to informing the public that securities-based crowdfunding is neither legal nor permitted until this rule-making process is concluded,” said D.J. Paul, a member of CFIRA’s Executive Committee and co-founder and Chief Strategy Officer of crowdfunder.com.
Crowdfund Intermediary Regulatory Advocates, or CFIRA, was established following the signing of the Jumpstart Our Business Startups (JOBS) Act. CFIRA is an organization formed by the crowdfunding industry’s leading platforms and experts. The group will work with the Securities & Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other affected governmental and quasi-governmental entities to help establish industry standards and best practices. For more information, visit www.CFIRA.org.