Friday, November 04, 2016

Massachusetts proposes crowdfunding, Reg. A + notice filing requirements

By Jay Fishman, J.D.

The Massachusetts Securities Division has proposed preliminary notice filing requirements for issuers making federal Regulation Crowdfunding or Regulation A + offerings. The Division asks industry persons to submit comments about the preliminary proposals.

Crowdfunding. Issuer requirement. Issuers intending to make an offering under federal Regulation Crowdfunding (17 CFR §227) and Securities Act, Sections 4(a)(6) and 18(b)(4)(C) would initially file with the Massachusetts Securities Division Director: (1) copies of all SEC-filed documents; and (2) a Form U-2, Uniform Consent to Service of Process (with a Form U-2A, Uniform Corporate Resolution, if applicable).

The issuer would make the above filing when it makes its initial Form C filing for the SEC offering, provided the issuer’s principal place of business is in Massachusetts. However, if the issuer’s principal place of business is outside Massachusetts but Massachusetts residents have purchased at least 50 percent of the aggregate offering amount, the issuer would make the above filing when it becomes aware that the purchases have met this threshold, but in no event later than 15 days from the offering’s completion date.

The initial notice filing would take effect for 12 months from the filing date with the Director.

The issuer, to continue the same offering for an additional 12-month period, would renew the notice on or before the current notice filing’s expiration date, by sending the Director “renewal” marked copies of all SEC-filed documents and/or a cover letter (or other document) request renewal of the initial notice filing.

Funding portal requirement. A “funding portal” defined by Exchange Act, Section 3(a)(80) that is a FINRA member with a Massachusetts principal place of business would file the initial notice by sending the Division: (1) a copy of SEC-filed Form Funding Portal (FP); (2) a copy of FINRA-filed Form FP-NMA; and (3) Form U-2, Uniform Consent to Service of Process (with Form U-2A, Uniform Corporate Resolution, if applicable). Funding portals would promptly send the Division: (1) a copy of any SEC-filed Form Funding Portal (FP) amendments; and (2) a copy of any FINRA-filed Form FP-CMA amendments. Funding portals would withdraw from FINRA membership by sending the Division a copy of Form Funding Portal (FP). Funding portals would, in writing, notify the Division of the funding portal’s no longer having a Massachusetts principal place of business.

Regulation A +. Initial filing. Issuers intending to make a Regulation A, Tier 2 offering in Massachusetts would file with the Secretary of the Commonwealth of Massachusetts at least 21 calendar days before the initial sale in the state: (1) a complete Uniform Notice of Regulation A – Tier 2 Offering Form (or copies of all SEC-filed documents); (2) a Form U-2, Uniform Consent to Service of Process if not filing on the Uniform Notice of Regulation A – Tier 2 Offering Form; (3) a Form U-2A, Uniform Corporate Resolution (if applicable); and (4) a filing fee of 1/20 of one percent of the aggregate offering amount, with annual minimum and maximum fees of $300 and $1,500, respectively. The initial filing would take effect for 12 months from filing date with the Secretary.

Renewal. Issuers, to continue the same offering for an additional 12-month period, would send the Secretary on or before the current notice filing’s expiration date: (1) the Regulation A – Tier 2 Notice Filing Form marked “renewal” and/or a cover letter (or other document requesting renewal); and (2) a renewal fee of 1/20 of one percent of the aggregate offering amount, with annual minimum and maximum fees of $300 and $1,500, respectively.

Amendment. Issuers, to increase the amount of the securities offered, would file a Regulation A – Tier 2 Notice Filing Form marked “amendment” (or file another document describing the transaction). An issuer, to increase the amount of the notice filed securities, would use the above fee to calculate the additional increment of funds to cover the increase. The issuer would send this additional increment of funds to the Secretary.

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