Private and Crowdfunding Campaign Together

According to the SEC’s proposed crowdfunding legislation a company will be able to simultaneously issue a private offering and a crowdfunding campaign.  This will increase a companies opportunities for raising capital, and provide qualify investment vehicles for non-accredited investors.  In other words accredited investors can participate in your private offering, at higher investment amounts, and non-accredited investors can participate through a crowdfunding portal that limits their overall investment. The goal of the ruling is to ensure that everyone has access, while limiting the investment risk for non-accredited investors that may not be able to sustain the loss.

The SEC analyzed the current market and determined that crowdfunding portals and broker dealers would benefit the most by working together.  This increases access to investors for both parties and benefits the company overall. Interestingly enough only 13% of all new Reg D offerings from 2009 to 2012 used a broker dealer.  Apparently many companies prefer to go it on their own or with local counsel.

If you are a company that needs to raise money consider the following:

Create One Set of Disclosurs

You will save time, and be in compliance, by creating one comprehensive set of disclosures that can be used in your private offering and crowdfunding campaign.  While there may be some changes, creating a core set of documents that is reviewed by a Securities Attorney is smart.  We recommend that you create disclosures as if you are offering the investment opportunity to a non-accredited investor.  While this is additional paperwork it will protect you down the road in the event that a non-accredited investor is accidentally allowed into your private offering.  While we can all say that this never happens – it does.

Audited Financial Statements

The SEC does not require audited financial statements for Reg D offerings.  However, it is important to note that the SEC will fine companies and issuers that make what they feel are misleading statements or representations.  Hiring a CPA to audit your financial statements removes some of the risk from the issuer.  If you provide accurate information to the auditor it is their responsibility to certify them which can protect the issuer in the event that the opportunity does not produce the level of return that was anticipated.


If you are going to run a crowdfunding campaign and issue a private offering simultaneously it is recommended that you use Rule 506c.  This lifts the ban on general solicitation.  One of the requirements is that the SEC has to review your advertising and marketing material prior to it being issued.  Since crowdfunding campaigns rely on marketing efforts submit those materials to the SEC for review as well and ensure that you are in overall compliance.  It is better to have the SEC comment and make changes, than to be fined after the fact.  It will also prevent some confusion.  For example if you are using Rule 504, which bans advertisement, while running a crowdfunding campaign, you would technically not be allowed to discuss your private offering in public forums.  It would be extremely confusing to separate the two so make it easier by using Rule 506c.

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