Friday, December 26, 2014

Real Estate Crowdfunding

More about crowdfunding and portals...

When speaking about equity-based crowdfunding, the U.S. securities laws do not differentiate among different uses of proceeds derived from raising funds through crowdfunding portals.  The same securities laws apply to real estate crowdfunding as to crowndfunding campaigns with a goal of investing into technology startups.  The key terms that participants should be aware of are: the JOBS Act, private placements, accredited investors, Rule 506(b) offerings, Rule 506(c) offerings, general solicitation and advertising, intrastate offerings, and broker-dealer registration, among others.  

This guide on real estate crowdfunding prepared by Goodwin Proctor attorneys provides a useful overall summary of applicable laws and may just as well apply to other types of equity-based crowdfunding.  The most useful, in my opinion, is the chart on pages 6-7 of the guide that summarizes how various online crowdfunding portals enable securities offerings.  Interestingly, most if not all, rely on Rule 506(c) that allows conducting private placements that use general solicitation and advertising.  The choice, in my opinion, depends in large part on the amount of information about possible offerings that is available to users of the websites.  Such information can be viewed as general solicitation and advertising if it is easily accessible on the Internet by anybody.  In such cases, reasonable steps must be taken to ensure that only accredited investors participate in the offerings.  

Another interesting fact that can be learned from the chart is that most portals are not registered as broker-dealers.  These are examples of how portals comply with the exemption from registration found in Section 4(b) of the Securities Act that was made possible by the JOBS Act.  I discussed the broker-dealer exemption in my recent blog post available here.  

This article is not a legal advice, and was written for general informational purposes only.  If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga.  Ms. Shulga is the founder of Shulga Law Firm, P.C., a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of business, corporate, securities, and intellectual property law.

1 comment:

  1. The same securities laws apply to real estate crowdfunding as to crowndfunding campaigns with a goal of investing into technology startups. VOffice Pte. Ltd. Singapore

    ReplyDelete