Tuesday, May 17, 2016

Regulators propose crowdfunding model rule for state offerings

By Jay Fishman, J.D.

The North American Securities Administrators Association, Inc. has proposed a model rule for issuers intending to make a federal crowdfunding offering in the states. The model rule, arising from the SEC’s May 16, 2016—effective crowdfunding rules, would require issuers making a federal crowdfunding offering to file a notice in those states where either: (1) the issuer has its principal place of business; or (2) where 50 percent of the aggregate amount of the offering has been purchased by residents. Public comments on the proposed model rule are due by June 17, 2016.

Proposal. For offerings made in reliance on federal regulation crowdfunding, the above issuers would be permitted, under the proposed model rule, to file a short form, Form U-CF, Uniform Notice of Federal Crowdfunding Offering, containing basic information about themselves, accompanied by a state-specific filing fee. A consent to service of process would be incorporated within the model form. The model rule would additionally include renewal and amendment requirements for federal crowdfunding offerings. The model rule and form can be adopted by any state desiring to have a notice filing requirement.

Issuers, instead of filing the above form, could send the states all SEC-filed materials in connection with the offering, along with federal Form C and a completed Form U-2, Uniform Consent to Service of Process.

NASAA President and Maine Securities Administrator, Judith Shaw said “today, as the SEC’s Regulation CF takes effect, the United States enters a new era in crowdfunding. I believe this milestone gives state regulators another opportunity to increase our collaboration with our federal partners. Ultimately, NASAA believes that the adoption of a model rule and uniform notice filing form by those states that wish to require notice filings will be a benefit to both issuers and regulators.” Shaw noted that 32 states and the District of Columbia have adopted intrastate crowdfunding models.