Here on Crowdfund Insider Samuel Guzik, Kendall Almerico and Kim Wales all shared similar thoughts regarding the legal costs associated with crowdfunding in the United States under what is to be Section 4(a)(6) of the Securities Act. In the world of equity crowdfunding, the associated legal and accounting fees for small issuers may prove to be high enough to render the exemption moot.
This is the same question at the core of a PDF published by Nancy Fallon-Houle, Esq. in which she explores “death by expense” for crowdfunding.
The Issuer needs lawyers and accountants before they can even begin the Crowdfunding process, at a cost that few Crowdfunded issuers can afford. This same phenomenon is why no one uses the Reg D 504 exemption, since a 504 offering must be registered in at least one state. Most state registrations require a full disclosure document and a registration and comment process, as well as “reviewed” financial statements, none of which are affordable to the small issuer. “Death by Expense” is what happened to Reg D 504.
The document is embedded below…