On April 4, 2016, the Financial Crimes Enforcement Network, a bureau of the Department of the Treasury (“FinCEN”), proposed amendments to the definitions of ‘‘broker or dealer in securities’’ and ‘‘broker-dealer’’ under the regulations implementing the Bank Secrecy Act (“BSA”). This rulemaking would amend those definitions explicitly to include “funding portals” that are involved in the offering or selling of “crowdfunded securities” pursuant to Section 4(a)(6) of the Securities Act of 1933. The consequence of those amendments would be that funding portals would be required to implement policies and procedures reasonably designed to achieve compliance with the BSA Act requirements currently applicable to brokers or dealers in securities. FinCEN stated that: “The proposal to specifically require funding portals to comply with the Bank Secrecy Act regulations is intended to help prevent money laundering, terrorist financing, and other financial crimes.” Written comments of this proposal must be submitted on or before June 3, 2016.
The Jumpstart Our Business Startups Act, enacted into law on April 5, 2012, established the foundation for a regulatory structure for startups and small businesses to raise funds by offering and selling securities through “crowdfunding” without having to register the securities with the Securities and Exchange Commission (“SEC”) or state securities regulators. In order to take advantage of this exemption for offerings of crowdfunded securities, an issuer must use the services of an intermediary that is either a broker registered with the SEC or a “funding portal” registered with the SEC.