On April 5, 2012, President Obama signed the JOBS Act, also known as the Jumpstart Our Small Startups Act, into law. The law was approved by the House and Senate with 380-41 and 73-26 votes, respectively, the week before the signing. Although it serves many various purposes, the one that has drawn the most attention is the one related to crowdfunding.
The JOBS Act has three provisions that permit crowdfunding:
Title II or Accredited Crowdfunding
Under Regulation D, Issuers may raise an unlimited quantity of money (506c). The deal may be “generally solicited” or promoted by the issuer online and in other places. Investors can only be authorized. Platforms/Issuers are required to confirm that investors are eligible to participate under this exemption (as opposed to Reg D 506b where investors may self-certify but issuers may not advertise).
Title II / Reg CF / Regulation Crowdfunding
A smaller business can collect up to $1.07 million thanks to this exemption from accredited and non-accredited investors. The proposals must adhere to a strict set of guidelines. A broker-dealer or a funding portal that has received FINRA approval must advertise the offer.
There are restrictions on how much an investor can put up.
A Mini-IPO exemption is also referred to as Title IV or Reg A+.
Reg A+ comes in two levels. Issuers in Tier I may collect a maximum of $20 million. Up to $50 million may be raised in Tier 2. Tier 2 issuers are exempt from state Blue Sky reviews and are permitted to collect money from investors in all 50 states. Participants may include qualified and non-accredited investors. The SEC must receive a thorough filing from the issuer and regulatory clearance before the issuer can start the offering. There are restrictions on how much an investor can put up.