In my last article on Crowdfund Insider, entitled: “JOBS Act Crowdfunding Begins on May 16, 2016: Don’t Get Busted for Solicitation!,” I warned of one of the hidden dangers for companies embarking on a Title III equity crowdfunding campaign – which goes live on May 16. In particular, I highlighted the limited ability of an issuer to engage in advertising its offering, courtesy of the JOBS Act.
In particular, Congress, in its wisdom, departed dramatically from the House version of this legislation, prohibiting all advertising in connection with Title III offerings unless this advertising took place on the SEC registered portal hosting the campaign. Hence, a limited ability for issuers to leverage social media of the portal. The SEC, in its Final Rules, provided a modest workaround: issuers could circulate an “off portal” notice with limited information – including a brief description of the business and the terms of the offering, albeit with a link to the crowdfunding portal. But that was all she wrote.
To make matters more complicated, in the Final Rules Release the SEC cautioned issuers about engaging in pre-offering advertising or solicitation under other long standing SEC rules. Yes, a company could continue to engage in regular business communications in the ordinary course immediately prior to the campaign launch, but with no mention of an offering. And if the issuer had no prior history of engaging in regular business communications, even these types of communications in close proximity before the formal portal launch of a crowdfunding campaign could spell trouble for the issuer.