Issuer Eligibility
- Must be a U.S. company organized under U.S. state or territorial laws
- Cannot be an SEC reporting company, investment company, or blank check company
- Must not be disqualified under “bad actor” rules (Rule 503 of Regulation Crowdfunding)
- Must have a specific business plan (not just to engage in a merger or acquisition with an unidentified company)
Offering Limit
- Can raise up to $5 million in a 12-month period
- This limit includes all Reg CF offerings within the past 12 months
- Must aggregate amounts sold in reliance on Reg CF with amounts sold in reliance on Rule 504 of Regulation D and in reliance on other exemptions
Investor Limits
- For investors with annual income or net worth less than $107,000:
- Greater of $2,200 or 5% of the lesser of annual income or net worth
- For investors with both annual income and net worth of $107,000 or more:
- 10% of the lesser of annual income or net worth
- Accredited investors have no limits
- All investor limits are calculated across all Reg CF offerings in a 12-month period
Disclosure Requirements
- File Form C with the SEC, which includes:
- Information about officers, directors, and owners of 20% or more of the company
- Description of the company's business and use of proceeds
- Price of the securities or method of determining the price
- Target offering amount and deadline
- Company's financial condition
- Financial statements:
- Offerings up to $124,000: Financial statements and specific line items from income tax returns, certified by the principal executive officer
- Offerings between $124,000 and $618,000: Financial statements reviewed by an independent public accountant
- Offerings over $618,000:
- For first-time Reg CF issuers: Reviewed financial statements
- For repeat Reg CF issuers: Audited financial statements
- Disclose risks to investors
- File annual reports (Form C-AR) and termination reports (Form C-TR) as needed
Use of Intermediaries
- Must use a single intermediary registered with the SEC (as a broker-dealer or funding portal)
- The offering must be conducted exclusively through the intermediary's platform
- Intermediary must:
- Provide educational materials to investors
- Take measures to reduce fraud risk
- Make issuer information available for at least 21 days before any sale of securities
- Facilitate the offer and sale of crowdfunded securities
Advertising Restrictions
- Issuers may not advertise the terms of a Reg CF offering except in a notice that directs investors to the intermediary's platform
- The notice is limited to:
- A statement that the issuer is conducting an offering
- The terms of the offering
- The name of the intermediary through which the offering is being conducted
- A link to the intermediary's platform
Ongoing Reporting
- File annual reports with the SEC and provide them to investors
- The annual report includes information similar to what's in Form C
- This obligation continues until:
- The issuer becomes a reporting company required to file reports under Exchange Act Section 13(a) or 15(d)
- The issuer or another party repurchases all of the securities issued in the Reg CF offering
- The issuer liquidates or dissolves its business in accordance with state law
Resale Restrictions
- Securities purchased in a Reg CF offering generally cannot be resold for one year
- Exceptions allow resales to:
- The issuer
- An accredited investor
- A family member
- In connection with the death or divorce of the purchaser
- Or as part of an offering registered with the SEC