Funding Portals Expected Despite Crowdfunding Disclosure Burdens

Jason Comerford

Apr 12, 2012

By Ryan Bolger, IFLR

Crowdfunding intermediaries, called funding portals, will bare a lot of the investor protection burdens included in the Jumpstart Our Business Startups (Jobs) Act. Companies are expected to use them as funding portals or broker-dealers, nonetheless.

[One] clarification needed to be made by government and regulators is whether foreign based companies with US subsidiaries will be able to take advantage of the crowdfunding provisions in the Jobs Act.

“Depending upon the SEC’s rulemaking, the removal on the prohibition on general advertising and general solicitation could end up being meaningless for a Canadian issue conducting a public offering in Canada with a concurrent private placement in the US,” said Jason Comerford, a partner with Osler, Hoskin & Harcourt. This is because of the existing US publicity restrictions in Regulation S, he added.

Regulation S is a provision of the US Securities Act governing the sale of unregistered shares outside of the US. It could also damper US company capital raising efforts because shares sold internationally would count towards the $1 million annual offering cap.

This is just another of the many questions the SEC seeks to answer in its implementation of the Jobs Act, in six months.