Crowdfunding Investments: With passage of the Jobs Act promoters are now able to offer a share of the profits in a project. This will likely encourage small investors who want to participate in film or other startup businesses, but can only afford to make a modest investment.
Funding portals are platforms that provide investors with information about investments being offered. These portals are designed to allow internet-based platforms or intermediaries to facilitate the offer and sale of securities without having to register with the SEC as brokers. Portals are required to register with the Commission and become a member of a national securities association (currently, FINRA). FINRA is an independent, non-governmental regulator for all securities firms doing business with the public in the United States. It is authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly.
The Securities and Exchange Commission (“SEC”), after a long delay, adopted rules to permit companies to offer and sell securities through crowdfunding. The new Regulations for Crowdfunding are to implement the requirements of the Jumpstart Our Business Startups Act (“JOBS Act”), enacted on April 5, 2012.
To qualify for equity crowdfunding one must meet specified requirements, including the following: the amount raised must not exceed $5,000,000 in a 12-month period; individual investments in all crowdfunding issuers in a 12-month period are limited to the greater of $2,500 or 5 percent of annual income or net worth, if annual income or net worth of the investor is less than $124,000; and 10 percent of annual income or net worth if annual income or net worth of the investor is $124.000 or more; and the funding portal must be registered and follow the rules that govern it. If you are an accredited investor, there are no limits on the amount you can invest.
For more information, see, https://www.sec.gov/oiea/investor-alerts-bulletins/ib-crowdfunding
One can only invest in a Regulation Crowdfunding offering through an online platform, such as a website or a mobile app, of a broker-dealer or a funding portal. Companies may not offer Regulation Crowdfunding investments to investors directly—they must use a broker-dealer or funding portal.
A list of portals can be found at: https://www.finra.org/about/firms-we-regulate/funding-portals-we-regulate
Companies that offer and sell securities to the public in reliance on an exemption from registration for securities-based crowdfunding must make filings on the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) which is the primary system for companies and others submitting documents under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940. This database provides free public access to corporate information, allowing you to research a public company’s financial information and operations by reviewing the filings the company makes with the SEC. https://www.sec.gov/edgar/search-and-access
Unfortunately there are a lot of unethical persons attempting to raise funds. To avoid fraudsters, counsel should conduct some due diligence. There are ways to check on brokers and promoters in addition to checking court records.
FINRA offers a website called BrokerCheck. BrokerCheck is a free tool to research the background and experience of financial brokers, advisers, and firms. BrokerCheck gives you a snapshot of a broker's employment history, regulatory actions, and investment-related licensing information, arbitration and complaints including a list of brokers that are barred by FINRA. The website is at: https://brokercheck.finra.org/