FINRA Requests Comment on Proposed Regulation of Crowdfunding Activities – Regulatory Notice 12-34

On July 5, 2012, FINRA published Regulatory Notice 12-34 requesting public comment on the scope of FINRA regulation that would be appropriate for member firms active in crowdfunding offerings.


The Jumpstart Our Business Startups Act (JOBS Act) contains key provisions relating to securities offered or sold through “crowdfunding.” The crowdfunding provisions of the JOBS Act provide an exemption from registration under the Securities Act of 1933 (Securities Act) for securities offered by issuers in amounts of up to $1 million over a 12-month period provided that the amount raised from any single investor adheres to strict limits (ranging from $2,000 to $100,000) based on the investor’s annual income or net worth.

The crowdfunding exemption establishes specific eligibility and sales practice standards for issuers and intermediaries that engage in crowdfunding. Intermediaries that seek to engage in crowdfunding must be registered as a broker or a funding portal, a newly created entity. The regulatory scheme established by the JOBS Act requires that each registered funding portal be a member of an applicable self-regulatory organization (such as FINRA), but limited authority to rules “written specifically for registered funding portals.”

Comments Requested

Funding Portals – possible rules concerning:

  • Supervision
  • Advertising
  • Anti-money laundering
  • Fraud and manipulation
  • Just and equitable principles of trade

Broker-Dealers – application of existing FINRA Rules to broker-dealer’s crowdfunding activities:

  • Relaxing existing rules for crowdfunding activities
  • Isolate crowdfunding activities from other activities
  • Implement the limitation on crowdfunding similar to funding portals
  • Special conflicts, such as a registered representative referring a client to the crowdfunding portal of the broker-dealer

Comments requested by August 31, 2012.

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