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SEC Crowdfunding Rules Take Hold in May

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The Securities and Exchange Commission’s crowdfunding rules become effective in May, and funding portals can start registering with the Commission later this month, SEC Chairwoman Mary Jo White said Thursday.

Speaking at the agency’s Investor Advisory Committee’s first meeting of the year, White reminded attendees that the equity crowdfunding rules the agency approved in October — which completed the agency’s last major rulemakings under the JOBS Act — will kick in come May, and added that the SEC has also been taking comments since October on the Financial Industry Regulatory Authority’s proposed rules that will allow funding portals to start operating.

The comment period on the FINRA proposal expired Jan. 11.

Judith Shaw, president of the North American Securities Administrators Association, encouraged the SEC and FINRA in her comment letter to work with NASAA and its members “to address potential issues that may present themselves in the registration of federal crowdfunding ‘funding portals’ that may be precluded from acting as an intermediary in an intrastate crowdfunding offering.”

Shaw noted that while “some state crowdfunding exemptions contemplate that a federally registered ‘funding portal’ may be able to conduct intrastate crowdfunding, it is not clear if this is permissible given the JOBS Act directive that a broker-dealer exemption for a funding portal is available only where the business is conducted solely in compliance with the federal crowdfunding rules.”

FINRA is charged with regulating broker-dealers that intend to develop Internet funding portals.

The SEC also issued in December proposed amendments to existing Securities Act Rule 147 to modernize the rule for intrastate offerings to further facilitate capital formation, including through crowdfunding. 

White also noted that the Commission looks forward to receiving comments on the agency’s recently released report on ways to “modernize” the accredited investor definition. White said the comments received would “help inform the Commission as it considers possible changes to the definition.”

The Investor Advisory Committee also welcomed a new member, Susan Wyderko, president and CEO of the Mutual Fund Directors Forum.