The JOBS Act as signed into law by President Obama on April 12, will allow small US. Companies and syndications to go to the Internet to raise up to $1 million over successive12-month periods from small investors in “CrowdFunding” Offerings.

WHEN:  Not in effect yet, the Jobs Acts gives the SEC 270 days to issue “Final Rules” for CrowdFunding Offerings.  But the time to gear up for this new method of raising money is now…!

WHO:

- Investors with Annual Income or Net Worth under $100K can invest up to 5% of their Annual Income or Net Worth, up to a maximum of $2,000 per year.

-Investors with Annual Incomes or Net Worth above $100K can invest up to 10% of their Annual Income or Net Worth, up to a maximum of $100,000 per year.

WHAT:  Common Stock, Syndication Units and other Securities can be sold to raise capital for specific Companies with Business Operations.  The Securities will be restricted from public resale for one year (and perhaps other restrictions if adopted by the SEC).

HOW MUCH:  $1,000,000 through your CrowdFunding Offering over any 12 month period.  (it’s a look back rule; you can keep raising money until you accept that last dollar which puts you at $1,000,000 raised, when measured over the proceeding 12 months).

You may be able to continue to raise money through a concurrent Private Placement Offering, but take care here, we’ll have to see what the SEC rules)

 

HOW:  A Public Offering Over the Internet….!

You will be required to use either a Registered Broker or a Registered Funding Portal.

If you use a Broker, the Broker can go out and recommend your securities and solicit purchasers for your securities.

Using a Funding Portal will likely be cheaper, but the Funding Portal can not solicit purchasers or recommend investment

The disclosures posted on the internet will have to be posted in final form for 21 days before funds can be accepted.

. A Target Offering Amount will be used, and must be reached before any of the sales proceeds from investors can be accepted.

Your posted materials will have to include a Business Plan; Use Of Proceeds; Target Amount and Deadline to Reach the Target; Ownership and Capital Structure, and a LAST LOOK once the Target is reached which allows investors to change their minds.

You will also have to provide Financial Information for your Company (Management Certified for raises under $100K, “CPA reviewed” in the case of raises up to $500K, and Audited for raises over $500K).

 

FUNDING PORTAL:  A “New” “SEC Registered” Entity created by the Act, whose business will be acting as a "Funding  Portal" Site through which prospective investors can obtain and review information about your Company and Business,  confirm their qualification to invest, and then place their investment in your Company.

Your Funding Portal may not solicit purchases, offers or sales to buy your securities, and is precluded from giving any investment advice or recommendations to those coming to the Portal Site.

You will be able to publish a Tombstone Ad directing prospective investors to the  Portal or Broker Internet site, but you can not otherwise advertise your offering, nor advertise its terms.

Blue Sky Notice filings may be required in your Home State, and the State (if different), where 50% or more of the investors reside, but the Act pre empts other states from piling on additional fees and filings.

 

CONTINUING OBLIGATIONS:  You will have to file Annual Reports and Financial Information (the Rules will be drafted by the SEC)

 

WHO CAN’T USE:  Investment Companies, Foreign companies, Reporting Companies under the “34 Act, and perhaps others the SEC decides to exclude)

 

SEASONED SECURITIES LAW ADVICE.  Everything you publish about your Company and your offering is subject to the Fraud standards of Federal Securities Laws, and you, your officers, directors and likely your controlling shareholders, will be liable for damages resulting from lost investments where there have been  material misstatements, or omissions of information necessary to make what was said not materially misleading.

You will need seasoned securities law counsel to help you carefully draft your Company materials.  Call if you would like further direction or legal advice on how to take advantage of this new Capital Raising Opportunity.



Don Davis  (direct:  213–400–2007)

The Law Offices of Davis & Associates

Securities, Corporate And Business Lawyers.


(Because the Law is new, and because the SEC has still to make Rules implementing its various provisions, the above represents a best guess guide of what  many of  the CrowdFunding Rules will look like.  This partial Summary should not be taken as complete, nor as necessarily correct in all aspects, and it is qualified in its entirety by reference to the text of the Act, and to the Rules ultimately adopted by the SEC which implement the Act.  In all cases consult with Legal Counsel before preparing a CrowdFunding Offering)