Title III of the Jumpstart Our Business Startups Act (the “JOBS Act”) introduced a new registration exemption under Section 4 of the Securities Act of 1933, as amended (the “Securities Act”), for equity crowdfunding, which is a method of raising capital in which Issuers to sell unregistered Securities to the public under certain circumstances. In other words, crowdfunding enables startups and small businesses that may not have easy access to traditional methods of capital markets and venture capital fundraising to raise capital from the “crowd.” To form the framework for the crowdfunding exemption, the JOBS Act amended the Securities Act by adding a new Section 4(a)(6) and instructing the SEC to issue rules under that section that it determines may be necessary or appropriate for the protection of Investors. The rules adopted under Section 4(a)(6) are contained in Regulation Crowdfunding.

In turn, Regulation Crowdfunding implements and further clarifies the statutory requirements of the Section 4(a)(6) exemption for crowdfunding Offerings. In general, Reg. CF governs offerings made in reliance on the Section 4(a)(6) crowdfunding exemption from Securities Act registration, provides a framework for the operations of crowdfunding intermediaries (i.e., Funding Portals), places restrictions on the resale of Securities sold in Section 4(a)(6) Offerings, and conditionally exempts Securities sold in Section 4(a)(6) Offerings from counting toward the Securities Exchange Act of 1934 registration threshold.

Generally, the total amount of Securities sold by an Issuers to all Investors under Reg. CF is limited to five million dollars ($5,000,000) in any twelve (12) month period. In addition, there are limits as to how much an Investor may invest in a Reg. CF Offering in any twelve (12) month period (please refer to the FAQ titled “What are the limits on the amount I may invest?” for more information on Investor limits). Moreover, Reg. CF Offerings must be conducted through a registered Funding Portal and online only by eligible Issuers (please refer to the FAQ titled “What types of Issuers are eligible to conduct Regulation Crowdfunding Offerings?” for more information on Issuer eligibility).