Recent SEC Guidance On Crowdfunding

On May 7, 2012, the Securities and Exchange Commission (SEC) Division of Trading and Markets issued guidance to prospective crowdfunding intermediaries under the Jumpstart Our Business Startups (JOBS) Act (H.R. 3606) in the form of Frequently Asked Questions (FAQs). The FAQs are set forth on the SEC's website. While much of the JOBS Act was intended to make capital raising easier for young companies, the SEC's guidance makes it clear that the SEC remains concerned about crowdfunding. As such, the final rules are likely to create a fair amount of "friction" for young companies to raise capital for equity through crowdfunding.

The guidance provides that any entities proposing to serve as crowdfunding intermediaries, either as brokers or funding portals, must first register with the SEC and the Financial Industry Regulatory Authority (FINRA), even if such entity is already a registered broker-dealer. The SEC, however, has not yet released the rules to implement the