The Securities and Exchange Commission has published the final rules regarding Title III of the JOBS Act that legalizes retail crowdfunding. While the Form Funding Portal and updated Form ID will be effective January 29, 2015, these regulations will not become actionable until 180 days following the publication in the Federal Register. This means the first Title III offers will commence mid-2016.
As outlined in yesterday’s article, the rules as described at the meeting of the Commission addressed several pressing concerns including audits (not necessary), curation (allowed) and portal liability (mitigated but not completely).
The embedded document includes much of the rationale behind the final decisions including an economic analysis of the current methods of companies attempting to raise up to $1 million of capital. The SEC itself highlights the problem as today an IPO costs, on average, $2.5 million. The ongoing compliance of a public company is $1.5 million per year. This means it is simply not feasible for smaller issuers to go to the public markets. The excessive cost, driven by regulation, has thus effectively killed off smaller IPOs.
The final rules register 686 pages topping the count for Title II of the JOBS Act which legalized accredited crowdfunding.