Changes In Intrastate Crowdfunding Rules: Will They Make A Difference?

On October 26, 2016, the Securities and Exchange Commission amended its existing safe harbor rule for intrastate investing, Rule 147, and added a new intrastate safe harbor, Rule 147A in an effort to reflect the realities of modern business. While these changes could provide a useful tool for small businesses, the SEC's evolving stance on nationwide crowdfunding and lack of coordination with existing state law may hinder their usefulness to any business beyond those looking for local or niche investors.

Under the old Rule 147, a business could offer and sell securities to investors in its state of formation and operation without the necessity of registering with the SEC, provided that certain requirements were met.  Rule 147, however, did not permit a business to make general offers, such as on the company's website, a social media page or through a crowdfunding platform.  With its new rules relating to intrastate offerings, the SEC took steps aimed at ameliorating