The JOBS Act of 2012 ushered into law three significant changes to the Securities Act of 1933 (the “Act”). These changes have been commonly referred to as “Crowdfunding.” The first, found in Title II of the Act, contained two changes. The first portion was a change to Rule 506 of Regulation D found in Rule 506(c). Prior to the passage of the Act, an issuer of securities was not permitted to use any form of general solicitation or advertising to attract investors to a private placement of securities unless the issuer, and its affiliates, had a substantial pre-existing business or personal relationship with the investor. Issuers of securities went through a painstaking process or creating these relationships with little certainly that the relationship was substantial. Title II of the Act permits the issuer to advertise and solicit its offerings with the express purpose of attracting investors. The one caveat is that the issuer must take steps to verify that the investor is, in fact, accredited. An accredited investor is generally a high earning or high net worth individual.

The second portion of Title II of the Act, found in Section 4(b) of the Act, was the creation of a scheme for an online portal platform to operate in a cloud-based environment. For the first time, Congress recognized that the offer and sale of securities could be accomplished in an electronic eco-system. Section 4(b) was enacted specifically for offerings of securities using general solicitation and advertising pursuant to Rule 506(c) of Regulation D.

The attorneys at Weintraub Law Group PC are uniquely qualified to advise clients in the Title II environment. The firm advises many clients who utilize portal platforms in the online offer and sale of securities. Additionally, we have drafted many private placement memoranda disclosing the offerings of securities using portal platforms. Mr. Weintraub has been an expert in this area and has been a keynote speaker and panelist in many seminars, conventions and meetings discussing the JOBS Act of 2012. In fact, Mr. Weintraub is a co-founder of CommunityLeader, Inc., a company that creates white-labeled portal platforms for its clients to provide for the offering and sale of securities. CommunityLeader, Inc. has devised unique software and services that are fully integrated for all offerings provided in the JOBS Act of 2012.

Title IV of the JOBS Act of 2012 introduced the first amendment to Regulation A since its enactment in 1982. The Securities and Exchange Commission (“SEC”), on March 25, 2015, issued the anticipated regulations for Regulation A+ (“Reg. A+”). Reg. A+ provides issuers of securities an alternative method of registering securities with the SEC. It is less costly and time consuming than filing an S-1 registration statement. An issuer may now register up to $50 million of free trading securities and offer the securities to the public. Up to $15 million of those securities may be registered by shareholders of the issuer. One of the key components of Reg. A+ is that it preempts the states from regulating in the area. This will reduce costs of a registration of securities and be more time efficient. The securities that are registered will be available to accredited investors and non-accredited investors alike. However, non-accredited investors who are natural persons will be permitted to invest no more than the greater of 10% of their income or net worth (calculated pursuant to rules set forth in Regulation D) in a transaction.

Mr. Weintraub has given several presentations in this area and Weintraub Law Group PC, in conjunction with CommunityLeader, Inc., is poised to provide expert service to clients who desire to raise capital using Regulation A+.

Equity Crowdfunding, enacted in Title III of the JOBS Act of 2012, is method for a new or existing company to secure the capital needed expand their business through collective cooperation, attention and trust by people who pool their money together in exchange for ownership in the company. Title III, when regulations are released (expected by the end of 2015), will provide issuers of securities the opportunity to raise up to $1.0 million in a 12 month period from the “crowd.”

Getting caught up in the excitement around Crowdfunding can be exhilarating. There are millions of potential investors at a company’s fingertips that can help launch or grow a business. But the crowd is noisy, the crowd is erratic, the crowd can get unruly. At Weintraub Law Group PC, we believe the key to raising funds from the crowd, is to lay a foundation of best practices by identifying qualified target investors, delivering a solid and compliant offering, managing the entire funding process, and creating a transparent environment for the investors and the company to pro-actively communicate.

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Jobs Act of 2012: Regulation A

View letter to the FINRA-SEC

Read “A Conservative Approach: Crowdfunding for Professionals” White Paper