Earlier this week, StartEngine announced it is now aiming to sell securities in all 50 states without a broker-dealer. This news comes less than a month after the equity crowdfunding platform filed with the Securities and Exchange Commission to raise up to $5 million in common equity at $5 per share. Chief Compliance Officer at StartEngine, Mary Frances Knight, stated:
“On September 6, 2017, StartEngine flipped the switch, and we shared our SEC Form 1-A filing with the public. Yes, we are plan to launch our own Large OPO (Reg A Offering), on our very own platform. The primary goal is simple, raise capital so that we can grow and launch 5,000 offerings in 5 years. This is not just Reg As and Reg CFs, but possibly REITs and ICOs. Our goals are lofty, and we have our work cut out for us. Preparing for our own raise has been a learning experience, and while the primary goal is capital for StartEngine, the raise is also an opportunity for us to experience what companies that conduct Large OPOs on our platform experience, every step of the way.”
Frances Knight also noted:
“One predicament of particular interest to companies conducting a Large OPO, and to us as well, whether to use a broker dealer or not. Regulation A+ does not require a company to use a broker-dealer to sell securities. Some companies may want a broker-dealer to reach investors. But with the ease of using electronic communications to promote a Regulation A+ offering, broker-dealers may not be needed at all for many companies. However, running a Large OPO without a broker dealer stops you from selling in Arizona, Florida, Nebraska, North Dakota, Texas, Washington, New York and New Jersey. We affectionately call these the “problem states.” In order to sell securities to investors in these states via a Large OPO without a broker dealer, companies must themselves register as Issuer-Dealers or register Agents of the Issuer, depending on the specific state requirement. What shocks me is that so many companies have opted out of using a broker-dealer and chosen to accept defeat and forgo offering securities in these states — millions and millions of dollars out of reach.”
She went on to explain for StartEngine’s own raise, she and her team wanted to make certain that they wanted to go through the extra effort to sell securities in all 50 states without having to deal with a broker-dealer, due to the fact that a broker-dealer can be costly. Her team has submitted their dealer applications in Arizona, Florida, North Dakota, Texas, and New Jersey; New York and Washington are next. However, there is no guarantee that the platform will be approved, and the platform cannot sell securities in these states until it is registered as a dealer (or our offering is qualified by the SEC for that matter). Frances Knight went on to add:
“So yes, selling securities in all 50 states without a broker-dealer will undoubtedly add to your company’s workload, but it’s not impossible. We’re trying it first hand, and we’ve yet to be turned away.”
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