We continue to wait for the SEC to issue final crowdfunding regulations— the comment period ended in January. Meanwhile, some states have sensed an opportunity. Section 3(a)(11) of the Securities Act exempts “intrastate” offerings from the Securities Act when the securities sold are part of any issue “offered and sold only” to persons resident within the specified state where the issuer is resident in or incorporated by, and doing business within, such state. SEC Rule 147 provides objective standards for determining eligibility for the exemption under Section 3(a)(11). Securities offered pursuant to Section 3(a)(11) are not considered “restricted securities” under the Securities Act, and neither Section 3(a)(11) nor Rule 147 prohibits “general solicitation” or “general advertising.” The primary concern for an intrastate offering is that it must be structured not to offer the proposed securities to non-residents.
Relying on the Section 3(a)(11) exemption, a number of states have recently implemented their own crowdfunding provisions, additional states are considering it, and a few states have determined not to implement such regulations. Each state that addresses crowdfunding has a maximum investable amount per investor and total offering size. Although crowdfunding is often associated with the offering of securities through use of an Internet portal, only two states—Indiana and Wisconsin—require that such offering be made exclusively through an Internet portal, while the remainder either state that the use of an Internet portal is allowed (but not necessarily required) or remain silent regarding the use of an Internet portal in executing an offering under the exemption. Each state also may require specified acknowledgments from the investor and differing levels of disclosure. At this time, none California, Delaware, Florida, Massachusetts, Nevada or New York has publicly indicated that it is considering intrastate crowdfunding legislation. It is also not clear how having up to 50 different state regimes will necessarily help the crowdfunding industry develop standardized processes that could make crowdfunding easier for startups.
We attach for your use a summary of the current state crowdfunding regulations with links to the statutes or regulation here: