Using Title II of the JOBS Act, Dinan & Co.’s crowdfunding platform ConfidentCrowd will offer small and mid-size businesses the opportunity to participate in much larger equity-based financings than available under the Title III crowdfunding provision of the JOBS Act, the Phoenix-based firm announced Tuesday.
ConfidentCrowd’s FINRA-registered broker-dealer network will use the 506(c) provision in Title II of the JOBS Act to provide entrepreneurs with access to the pools of capital available in the accredited investor community. Most existing crowdfunding portals are not licensed as broker-dealers, and are therefore unable to raise money under Title II, according to a Dinan release.
Title II amends Regulation D, Rule 506 of the Securities Act, to lift the ban on general solicitation and advertising connected with the sale of private securities. As a result, business owners that register with ConfidentCrowd will have better access to higher potential funding and the resources of accredited investors including high net worth individuals, family offices, pension funds, insurers, endowments and foundations, according to Dinan.
“While Title III Crowdfunding has drawn the early headlines, we believe Title II offers superior capital-raising opportunities, as well as a more compelling value proposition for both issuers and investors,” said Mike Dinan, founder of ConfidentCrowd and CEO of Dinan & Co., in a statement. “The implementation of Title II of the JOBS Act will open the floodgates to larger, more sophisticated pools of equity capital funding and likely will occur well before the crowdfunding exemption under Title III becomes effective.”
The addition came in response to broker-dealer members who expressed a desire to underwrite larger equity offerings, Dinan added.
Dinan’s research shows that the amount of capital raised from Reg D offerings in the U.S. market in 2010 exceeded $900 billion. Issuers that take advantage of Reg D offerings will also be able to raise larger amounts of capital because the regulation does not include a hard cap funding limit.
Read more about ConfidentCrowd at Kickstarter for Wall Street? Broker-Dealers Get Into the Crowdfunding Game on AdvisorOne.com.