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Chat with the Experts on How Crowdfunding in the U.S. Will Take Shape

Chat with the Experts on How Crowdfunding in the U.S. Will Take Shape

Key details: Our live chat with the leadership group working to develop a self-regulatory framework for the crowdfunding industry will begin at 5pm GMT / 12pm EST / 9am PST on Monday, April 9. You can submit your questions for this panel of experts right now in the comments at the end of this post, or to

As President Obama is expected to sign the JOBS Act into law at 2pm EST on April 5, 2012, a leadership group consisting of equity and debt crowdfunding platforms and industry experts including legal, securities and SEC experts, have mobilized to explore the development of a self-regulatory framework for the crowdfunding industry. The JOBS Act requires that all equity and debt crowdfunding platforms be a member of a national securities association. This leadership group will explore the various paths to meet that requirement in ways that protect investors and support a vibrant industry.

Chat live on with representatives from this group, including Jason Best and Sherwood Niess, Startup Exemption; Ruth E. Hedges, CEO of Funding Roadmap; David Drake and Dara Albright of SoHoLoft; Candace Klein from SoMoLend; Spencer Taylor, Co-Founder of LaunchtVince Molinari, CEO of Gate Technologies; and Kevin Berg Grell from CAPS/, Berkeley Geddes, CEO of Grow America Ventures, Chance Barnett, Founder & CEO of, Michael Norman, Co-founder of at 5pm GMT / 12pm EST / 9am PST on Monday, April 9 to ask questions and offer input regarding key elements of the framework including principles that will:

  • Establish strong protections for investors in the form of an Investor's Bill of Rights, including tests to assess investors' understanding of risk, criminal background checks on issuers, and adequate disclosures by issuers;
  • Ensure confidentiality of investors’ personal financial information;
  • Ensure that investors do not exceed statutory investment limits, by implementing standardized reporting and communication among platforms;
  • Establish standard communication processes for transparent flow of information between the issuer, the investor, the intermediary and the regulatory agency;
  • Develop a code of conduct for crowdfunding platforms, with enforcement mechanisms to punish bad actors;
  • Create a recognizable brand common to trustworthy intermediaries.

Founding leadership group members (in alphabetical order) include:

CAPS Crowdfunding Accreditation Program
Funding Roadmap
Gate Technologies
Soho Loft Capital Creation Events
Startup Exemption
• The founders of ProFounder Dana Mauriello & Jessica Jackley

To be sure to get your questions answered by these folks at the center of the burgeoning crowdfunding industry, feel free to leave your queries in the comments below or e-mail We'll also be checking our Facebook page and Twitter feed for your questions and comments.

Also, read up on's coverage of the JOBS Act and the crowdfunding industry in the U.S.:

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  • David Simpson David Simpson Apr 05, 2012 02:50 am GMT

    1) If members of a crowdfunding platform maintain a cash balance from which to invest in projects, what are the implications for a company to fall under banking regulations?
    2) Can all shares issued in companies be electronically stored on the crowdfunding system with all reporting also being paperless in effect making the CF site a transfer agent? If you also added a trading platform, what agencies would the firm find itself needing to comply with? (NASD, SEC, FINRA)?
    3) How will this work with the IRS? People will have capital gains and (mostly) losses. Can you discuss 1099 and other filings and the best model you envision for interacting with state and federal tax bodies?
    4) what kind of business insuance policy/bonding and exposure coverage is recommended relative to the size of the business?
    5) so the federal law gets passed - what happens to all the state blue sky laws?
    6) this is kind of a stupid question, but the new law allows for public solicitation for projects meeting the crowdfunding parameters. Does that mean I can publicly solicit the Average Joe for $1,000 but I can't publicly solicit a sophisticated investor for $100,000? Or, more logically, the whole abolition is being scrapped?

  • Guest Brad McGee Apr 06, 2012 04:16 pm GMT

    With respect to the CAPS accreditation process, some of the information sought are things that may be proprietary (about whether a company analyzes success/failure or how they enhance users' experience, for instance). This raises the following questions:
    1. Are answers to the questions public?
    2. Available to insiders only?
    3. Do the insiders include crowd funding competitors?

    Thank you.

  • Guest Javier Apr 06, 2012 07:04 pm GMT

    FINRA vs CAPS:
    Does the CAPS intiative plan to register as a national securities association? We would prefer to register ourselves to an SRO dedicated to funding portals (like CAPS) as opposed to FINRA, a heavily bureaucratic agency which would add significant costs to organizing a funding portal.

    Blue Sky Laws:
    With respect to the above question on blue sky laws, federal laws preempts state law, consequently, blue skys would not be applicable on funding portals. Of course, state law can still enforce fraud claims against these firms and any issuer.

  • Apr 07, 2012 05:15 pm GMT

    Here's a few more questions that we received via e-mail:

    First, I am unsure how the funding portals will work in practice, as Sec 304(b)(80)(D) states that funding portals will not "hold, manage, possess, or otherwise handle investor funds or securities." I suppose the prohibition on holding was enacted to prevent the need for investor protection in the event of a funding portal brokerage failure. But if the funding portals are unable to handle the funds themselves, how will they be able to practicably function as intermediaries? This seems particularly unclear pertaining to Sec 4A(a)(7) (requiring intermediaries to ensure that offering proceeds are only provided to the issuer when the target is reached and permitting investors to cancel their commitments).

    Second, how does a Crowdfund SRO plan to work with the SEC to delineate what the Crowdfund SRO will be responsible for versus what the SEC will responsible for? Specific boundaries seem like they will be necessary to create proactive enforcement that avoids finger-pointing problems.

    Third, what can be done to ensure that investors do not exceed statutory investment limits? It seems that it will be easy for investors to evade these requirements and that intermediaries brokering the transactions will have little incentive to invest the time and resources to ensure that investors are reporting proper numbers.

  • Apr 08, 2012 11:12 pm GMT

    This one is from Ralph Stokes at Growthink regarding the EB-5 visa.
    [Ralph and readership: please see EB-6 ( for more information]

    I understand that the methodology is in its infancy, but has anyone had conversations regarding entrepreneurs that are based outside of the US? Also any thoughts regarding EB5 strategies; if an international entrepreneur sets up a company in the US and is able to raise funds, hire an organizational staff and meets EB5 qualifications minus his own personal funding. Would the international founder be allowed to receive a green-card?

  • Guest JD Polk Apr 09, 2012 02:15 pm GMT

    I am forming a Financial Services Fund for Hard Money Lenders.
    To be able to absorb the glut of new empty REO's that will be coming down the pipeline in the next 12 to 18months as to try and keep the up-swing we have seen in RE market appreciating instead of depreciating.
    Will I be able to raise start-up capitol doing an internet Auction of the Stock
    To raise 1M USD only for 3 to 5yr deal?
    With exit strategy when market has appreciated.

  • Sara Hanks Sara Hanks Apr 09, 2012 03:17 pm GMT

    Hi, I'm wondering whether the SEC has indicated that they will approve a crowdfunding SRO as the only body with jurisdiction over the industry, or whether we might end up with FINRA overseeing us too?

  • Guest Paul Winkle Apr 09, 2012 03:44 pm GMT

    If an issuer decides to raise capital via a registered crowdfund investing portal with the intent of conducting a DPO (Direct Public Offering), does the issuer need to complete the raise through the portal prior to filing an S-1 for review, or can the issuer offer registered S-1 shares through the portal prior to trading (filing a 15c2-11 with FINRA through a broker/dealer)? I reference SEC. 4A (b) (2) (A) below:

    ‘‘(b) REQUIREMENTS FOR ISSUERS For purposes of section 4(6), an issuer who offers or sells securities shall—
    ‘‘(2) not be—
    ‘‘(A) subject to the requirement to file reports pursuant to section 13 or section 15(d) of
    the Securities Exchange Act of 1934

    Does the panel think the SEC will provide guidance as to a valuation model for pricing securities as described under SEC. 4A (b) (3) (H) (iv)?

    ‘‘(3) file with the Commission and provide to investors and the relevant broker or funding portal, and make available to potential investors—
    ‘‘(H) a description of the ownership and capital structure of the issuer, including—
    ‘‘(iv) how the securities being offered are being valued, and examples of methods for how such securities may be valued by the issuer in the future, including during subsequent corporate actions; and

  • Guest Kevin Apr 09, 2012 03:46 pm GMT

    Can the operator of the platform also be the entity that uses the funds?

  • Guest David Barrow Apr 09, 2012 03:52 pm GMT

    Will crowdsourcing platforms consolidate my investors into a single instrument that will allow me to manage one entity, rather than hundreds?

  • Guest Anthony Jewett Apr 09, 2012 04:01 pm GMT

    What might the accreditation process look like or include, how long might it take and how much will it likely cost for interested intermediaries?

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