Since my last update on March 19, 2015, Update #2: U.S. Intrastate Equity Crowdfunding Exemptions: 17 State Bills Adopted and 21 Pending, five (5) more states have enacted an intrastate crowdfunding exemption bringing the number of states with an equity crowdfunding exemption to twenty-two (22) states.
The latest states to enact an intrastate crowdfunding exemption are: Arizona (enacted April 1, 2015 – effective July 3, 2015 ), Colorado (enacted April 13, 2015 – effective July 3, 2015), Kentucky (enacted March 19, 2015 – effective June 24, 2015), Montana (enacted into law April 1, 2015 – effective July 1, 2015), and Virginia (enacted March 19, 2015 – effective July 1, 2015).
This is a list of the states that have enacted state crowdfunding legislation and regulations as of April 16, 2015:
- The Idaho Department of Finance issued an order on January 20, 2012, which mirrors the intrastate crowdfunding rules adopted in other states. A blanket order has not been adopted in Idaho and an intrastate equity crowdfunding bill has not been proposed in Idaho at this time. Issuers wanting to crowdfund in Idaho would need to obtain their own order from the Idaho Department of Finance before conducting an equity crowdfunding campaign.↩
- The Secretary of State of Mississippi filed an Administrative Notice on February 9, 2015 regarding its intent to adopt Proposed Rule 2.04 Invest Mississippi Crowdfunding Simplified Registration Statement by Administrative Action. Under the notice the proposed rule became effective 30 days from the date of filing or March 11, 2015.↩
At the federal level, most of these exemptions rely on SEC Rule 147 intrastate exemption but a handful of jurisdictions are relying on SEC Regulation D, Rule 504 requiring qualification to crowdfund in their state. Mississippi and Maine are examples of the later. California currently has both a Rule 147 and Rule 504 based equity crowdfunding exemption under consideration. Securities legal counsel across the U.S. believe the existing interpretation of Rule 147 by the SEC leaves issuers, agents and purchasers open to liability.
Sixteen (16) additional states are looking at adopting an intrastate equity crowdfunding exemption: Alaska, California, Florida, Hawaii, Illinois, Iowa, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, Nevada, New Mexico, North Carolina, South Carolina, and West Virginia. Two (2) additional states, Connecticut and Rhode Island are each looking at conducting a study as the first step to considering implementing an intrastate crowdfunding exemption in their respective state.
Pennsylvania, has enacted securities rules tied to the federal crowdfunding exemption. These rules require a funding portal to register and submit to examination with the Pennsylvania securities regulator if Pennsylvania is the home state of a federally registered funding portal. It also requires an issuer to file a notice with the state regulator if Pennsylvania is the issuer’s home state or if 50% or more equity crowdfunding sales are made to Pennsylvania residents.
SEC Commissioner Piwowar in his opening statement at the SEC meeting adopting Regulation A+ March 25, 2015, called for the SEC to look at “potential exemptive relief under the intrastate exemption to allow for regional crowdfunding conducted pursuant to state securities laws.” (paragraph 4). I believe we will have SEC exemptive relief for intrastate crowdfunding before we will see the SEC adopt equity crowdfunding rules under Title III of the Job’s Act.
Intrastate equity crowdfunding in Texas, despite the issues around Rule 147, has really taken off. Six portals have registered in Texas with a number of these portals having already closed campaigns. http://www.ssb.state.tx.us/Important_Notice/Registered_Crowdfunding_Portals.php
* * *
DisclaimerThe articles on this blog are not intended to create and do not create, an attorney-client relationship. You should not act or rely on information on this website without first seeking the advice of a lawyer. This material is intended for general information purposes only and does not constitute legal advice. You are advised to contact legal counsel prior to undertaking any securities transaction. Laws change and there are subtle nuances to the rules that may apply in your particular circumstance.