The Massachusetts Securities Division has proposed new regulations pertaining to securities offered under Tier II of Regulation A+ and Reg CF, both created by the JOBS Act of 2012. The state agency has also proposed notice filings for Reg CF portals. The proposal is now open for comments from interested parties pursuant to the Massachusetts Administrative Procedure Act.
The state securities regulator is circulating the proposed rules;
I. A proposed notice filing for Regulation A+, Tier 2 offerings.
II. Two proposed regulations relating to federal crowdfunding under Title III of the JOBS Act of 2012. These regulations are:
(a) a notice filing for crowdfunding issuers conducting an offering as described in Title III of the JOBS Act and
(b) a notice filing requirement for Funding Portals as described in Title III of the JOBS Act.
The Securities Division explains that Title IV of the JOBS Act of 2012 amended Section 3(b)(2) of the Securities Act of 1933 to provide for Tier 2 Regulation A+ offerings. That exemption allows sales of up to $50,000,000 worth of securities in a 12-month period. Under SEC regulations, securities sold under Tier 2 are federal covered securities under Section 18 of the Securities Act.
The filing under the proposed regulation will use the notice form adopted by the North American Securities Administrators Association for its model notice filing for Tier 2 offerings, along with Form U-2A (if applicable) and an undisclosed filing fee.
The Division has proposed regulation that requires a short notice filing from a crowdfunding issuer that is conducting its crowdfunding offering in the Commonwealth of Massachusetts and (a) such issuer has its principal place of business in the Commonwealth or (b) 50% or greater of the aggregate amount of the offering has been purchased by residents of the Commonwealth.
Under Title III of the JOBS Act of 2012 a new federal exemption from registration for crowdfunding offerings under Section 4(a)(6) of the Securities Act of 1933. The exemption allows sales of up to $1,000,000 during a 12-month period, imposes investment limits for investors, and requires the offering to be made through either a registered broker-dealer or funding portal.
The JOBS Act preempted state filing and fee requirements with respect to offerings conducted under the federal crowdfunding exemption except for a state: (i) that is the principal place of business of the issuer or (ii) where purchasers of 50% or greater of the aggregate amount of the offering reside.
The proposed regulation would require the filing of a notice, the materials filed with the SEC (including SEC Form C), a consent to service of process on Form U2, and Form U-2A (if applicable). The regulation also sets forth renewal and amendment requirements for federal crowdfunding offerings.
The Securities Division is specifically seeking comments on the proposed regulation that requires a notice filing from any Funding Portal having a principal place of business in the Commonwealth.
The proposed regulation would require the notice filing of a copy of Form Funding Portal (FP) as filed with the SEC, Form FP-NMA as filed with FINRA, and a consent to service of process on Form U2 along with Form U-2A (if applicable). The regulation also sets forth amendment and withdrawal instructions for Funding Portals.
Comments may be submitted by emailing the Securities Division.
Individuals may contact Peter Cassidy, Esq. (regarding the crowdfunding issuer notice filing and/or the Regulation A+, Tier 2 notice filing) or Estefania Salomon, Esq. (regarding the Funding Portal notice filing) at (617) 727-3548.