Regulation Crowdfunding, or Reg CF, is a securities exemption that enables online capital formation for smaller issuers. The exemption only requires a notice filing with the SEC, and thus does not need to be “qualified” by the regulator before the business raises money online. Typically, an issuer uses Reg CF because they view it as a less costly path to raise funds legally. Yet, responsibilities remain after a funding round has been completed.
As noted by Crowdfund Capital Advisors (CCA), issuers with a calendar-year financial reporting period are required to file Form C-AR by April 30th. If you do not, you are in breach of the rules, something that could impact your ability to raise money in the future.
Additionally, the SEC could pursue an issuer that is out of compliance, something they have yet to do, recognizing that many issuers are very small. Some may be out of business (and have not yet notified the SEC). While the SEC is aware of the (minor) transgression, the Commission has bigger fish to fry. It has been estimated that around 40% of issuers may be out of compliance for failing to file Form C-AR.
While the SEC may be miffed with issuers who forget or ignore filing the document, investors are also losing out as they should be demanding, at a minimum, annual updates for a company they supported.