Reg CF Chatter: There are a Flood of New Funding Portal Applications

Word on the street is there has been a recent increase in applications to become a FINRA regulated Funding Portal.

A funding portal is a relatively new entity created under the JOBS Act of 2012. Funding portals may raise capital under Regulation Crowdfunding, commonly referenced as Reg CF. A funding portal is a regulated entity and a bit like a broker-dealer lite as it must adhere to certain compliance rules as it hosts companies seeking capital that sell securities online.

Under current rules, an issuer may only raise $1.07 million under Reg CF in any one year – a relatively anemic and arbitrary amount. The Securities and Exchange Commission (SEC) has proposed raising the funding cap to $5 million – a move that may be fueling renewed interest in the securities exemption.

Currently, there are 54 FINRA regulated funding portals and 12 former funding portals that no longer operate (and several that have not paid their FINRA dues). Although there are a good number of these regulated investment platforms, the bulk of the Reg CF offerings are hosted on a handful of online capital formation platforms. As well, broker-dealers may issue securities under Reg CF and several former funding portals have let go of their funding portal designation to become broker-dealers.

So will we see an increase in new funding portals and affiliated securities offerings? Most likely yes, once the SEC moves the funding cap to a more reasonable amount.



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