Can a Non-Registered Individual Conduct Crowdfunding for My Company?

Question from Alex, Can a Non-Registered Individual Conduct Crowdfunding for My Company?

Answer from AI:

Crowdfunding has become a popular method for companies, especially startups, to raise capital. In the United States, the rules surrounding crowdfunding are regulated to protect investors and ensure the integrity of the financial markets. When considering involving someone who is not registered with financial regulatory bodies to conduct crowdfunding for your company, it’s essential to understand the legal landscape.

Understanding Crowdfunding Regulations

In the U.S., the Securities and Exchange Commission (SEC) oversees crowdfunding activities under regulations that came into effect with the Jumpstart Our Business Startups (JOBS) Act of 2012. Specifically, Title III of the JOBS Act, also known as Regulation Crowdfunding (Reg CF), allows companies to raise funds from the general public, subject to certain conditions and limitations.

Key aspects of Regulation Crowdfunding include:

• Companies can raise a maximum amount of $5 million in a 12-month period from individual investors.
• Investors are subject to investment limits based on their income and net worth.
• All transactions must be conducted through an SEC-registered intermediary, either a broker-dealer or a funding portal.

Role of Registered Intermediaries

The requirement for transactions to be conducted through registered intermediaries is particularly relevant when considering having someone non-registered conduct crowdfunding for your company. These intermediaries are subject to SEC regulation and are responsible for ensuring compliance with the law, including anti-fraud provisions and investor protection rules.

Can a Non-Registered Individual Be Involved?

While a non-registered individual cannot directly conduct crowdfunding transactions or solicit investments on behalf of your company, they can still play a role in your crowdfunding campaign. This might include:

• Marketing and promotional activities to raise awareness of the crowdfunding campaign.
• Providing advice and support in preparing the campaign, as long as they do not engage in activities that would require them to be registered as a broker or dealer.

It’s crucial to ensure that any involvement by non-registered individuals does not cross the line into activities that would require registration. This includes soliciting investments, handling investor funds, or providing investment advice.

Legal Considerations and Recommendations

Before proceeding with a crowdfunding campaign, consider the following steps to ensure compliance with legal requirements:

1. Consult with a legal professional who specializes in securities law to understand the specific obligations and restrictions under Regulation Crowdfunding and other relevant securities regulations.
2. Choose a reputable, SEC-registered intermediary to conduct the crowdfunding campaign on your company’s behalf.
3. Ensure that any non-registered individuals involved in the campaign are clear on the boundaries of their role and do not engage in activities that could be construed as requiring registration.

For more detailed information on Regulation Crowdfunding and the role of intermediaries, visit the SEC’s official page on Regulation Crowdfunding.

Remember, this information is provided for general guidance and does not constitute legal advice. Crowdfunding involves complex legal and regulatory requirements, and it’s essential to consult with a legal professional to navigate these challenges successfully.