Selling Equity Through Crowdfunding: A Comment

Abstract

The Securities and Exchange Commission has proposed rules that will implement the crowfunding exemption set forth in the JOBS Act. See SEC File No. S7-09-13. Once implemented, the exemption will allow non-reporting companies to use crowdfunding to raise equity. The SEC’s proposal, however, raises a number of issues, including: (A) concerns over reliance on the “collective wisdom of the crowd” as a substitute for traditional investor protections; (B) concerns over reliance on investor self-certification as a means of enforcing the investment limits for individual investors; (C) the inconsistency of the proposed method of calculating the offering limits applicable to issuers with the requirements of the JOBS Act; (D) concerns over the elimination of the integration doctrine; (E) the need to address and include persons in civil unions/civil partnerships within the definition of family member; and (F) the need to require the filing of Form Funding Portal in an interactive format. The attached paper analyzes all of these issues.