Summary of Title III

3 min read • Nov 19, 2013 • Guest Post

On October 23rd the SEC voted to propose rules under Title III of the JOBS Act. These rules will create an exemption under current securities laws to allow crowdfunding portals, like EquityNet, to offer and sell securities online. This will simplify fundraising for small businesses and startups by allowing them to raise capital from an enormous pool of investors. It will also provide a wide range of investment opportunities for both accredited and non-accredited investors. The proposed rules are currently undergoing a 90-day public comment period. After that, the SEC will take 30 days to evaluate the comments and set up another vote 15 days after their review period. We’ve provided a brief summary of the proposed rules below. Proposed Rules for Small Businesses and Startups

  • Companies can raise up to $1 million total per a 12-month period through crowdfunding platforms.
  • Companies must provide updates on progress towards their funding goals.
  • Companies would be required to file annual reports to the SEC and make those reports available to their investors.
  • Companies have to provide information about the following:
    • Officers and directors of the company as well as owners of 20 percent or more of the company.
    • Nature of the company’s business.
    • Intended use of funds acquired through an offering.
    • Targeted offering amount.
    • Deadline to reach a funding goal.
    • Financial condition of the company.
    • Company’s financial statements with tax returns or findings from an audit conducted by a public accountant or auditor.
    • Not all companies are eligible to participate in crowdfunding.
      • Crowdfunding applies to U.S. companies only.
      • Companies that already report to the SEC are not eligible.
      • Companies that fail to report to the SEC under the proposed rules are not eligible.
      • Companies without a specific business plan are not eligible.

Proposed Rules for Investors

  • Over the course of a 12-month period an investor is allowed to invest:
    • $2,000 or 5 percent of his or her annual income or net worth (whichever is greater) if annual income is less than $100,000.
    • 10 percent of his or her annual income or net worth (whichever is greater) is equal to or greater than $100,000.
    • Investors with an annual income or net worth greater than or equal to $100,000 cannot invest more than $100,000 in crowdfunding during a 12-month period.
    • Securities purchased through crowdfunding cannot be resold for one year after purchase.

Proposed Rules for Crowdfunding Platforms Crowdfunding platforms are required to do the following:

  • Provide investors with educational materials.
  • Take measures to reduce the risk of fraud.
  • Make information available about issuers and offerings.
  • Provide communication systems for issuers and investors.
  • Facilitate the offer and sale of crowdfunded securities.

Crowdfunding platforms are not permitted to:

  • Offer investment advice.
  • Solicit purchases, sales, or offers to buy securities advertised on their sites.
  • Impose certain restrictions compensating people for solicitations.
  • Holding, possessing, or handling investor funds or securities.

The comment period for these proposed rules is currently in its second week. For a list of the comment made so far regarding Title III, click here. If you would like to add your own comment, click here. Author: Adam Vanderbush | Google +


Adam Vanderbush

Adam leads EquityNet’s marketing strategy to maintain the Company’s leadership position and to significantly expand the market awareness of EquityNet. He is responsible for collaborating with the EquityNet team to improve and expand the Company’s web marketing presence and associated traffic, including paid advertising, organic search engine rank, social media, conversion rate optimization, and many factors of viral growth.