Friday, May 08, 2015

Mississippi Adopts Crowdfunding Exemption

By Jay Fishman, J.D.

The Mississippi Securities Division within the Secretary of State’s Office adopted an exemption for intrastate crowdfunding offerings that comply with Securities Act Sec. 3(a)(11) and SEC Rule 147. The exemption highlights include the following:
  • The aggregate amount the issuer, under the exemption, may sell to all investors within the 12 months preceding the transaction date must not exceed either: (1) $1 million, if the issuer did not make the most recent fiscal year’s financial audit documents available to prospective purchasers; or (2) $2 million, if the issuer did make the most recent fiscal year’s financial audit documents available to prospective purchasers; 
  • The aggregate amount multiple issuers, under the exemption, may sell to any single accredited investor within the 12 months preceding the transaction date may not exceed the greater of: (1) If the investor had an annual income of at least $200,000 each year for the last two years (or $300,000 together with the investor’s spouse if married) and expects to make the same amount in the current year, then 5 percent of the investor’s annual income, not to exceed an aggregate amount of $50,000; or (2) If the investor’s net worth is at least $1 million, then 5 percent of the investor’s net worth, not to exceed an aggregate amount of $50,000; 
  • The aggregate amount multiple issuers, under the exemption, may sell to any single nonaccredited investor within the 12 months preceding the transaction date may not exceed the greater of: (1) $5,000; (2) 5 percent of the investor’s annual income if the investor had an annual income of less than $200,000 each year for the last two years (or less than $300,000 together with the investor’s spouse if married); or (3) 5 percent of the investor’s net worth if the investor’s net worth is less than $1 million. 
  • Single or multiple issuers, under the exemption, may sell an unlimited aggregate amount to “qualified Purchaser” investors. 
  • Investor funds must be deposited in escrow, with the issuer required to raise the minimum targeted amount by the offering deadline to receive the proceeds; 
  • The issuer, before consummating the purchase, must require each prospective investor to certify certain prescribed information about himself, e.g., his name, address, social security number, and the aggregate amount sold to him; the issuer must maintain records of the investors’ residence, and must make the records available for Division inspection; 
  • Offers and sales must be made exclusively through an Internet website operated by an intermediary meeting specified requirements; the issuer must, before making any offers or sales, provide the intermediary with evidence that the issuer is organized and authorized to do business in Mississippi; and 
  • The issuer must file a notice with the Division on Mississippi Form IMC, Invest Mississippi Crowdfunding Form, accompanied by a copy of the escrow agreement and all other Form IMC exhibits; the completed Form IMC, including exhibits, must be provided to the relevant intermediary; and this must be made available to potential investors after the Division issues an Acknowledgment of Completed Invest Mississippi Crowdfunding Exemption Form

1 comment:

Ortan Steve said...

Perhaps adopting intrastate crowdfunding exemptions like those being considered by these other states can be a step in the right direction for California to retain businesses that are already here.
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Dianne Barry