The Massachusetts crowdfunding bill passed and the state has recently joined a number of other states in adopting a crowdfunding exemption from securities registration. Requirements for crowdfunding offerings made within the state are laid out, with the purpose of enabling businesses to more easily use the crowdfunding portals to raise capital. The bill was adopted as an emergency regulation that took effect immediately, and the exemption permits companies that are based in Massachusetts to raise capital from Massachusetts only investors.
There has been a lot of interest in crowdfunding at the federal level, including the Jobs Act in 2012, but the SEC seems currently stalled in adopting the final rules that would allow the model to proceed. Anxious to release the backlog of investor interest in funding local businesses, a number of states have taken matters into their own hands, passing bills allowing crowdfunding, using rules similar to the ones just adopted in Massachusetts.
Under a Massachusetts crowdfunding campaign, a business may use the new exemption for deals of up to $1 million in securities annually, or up to $2 million in if the business makes audited financial statements available to each investor. The bill also imposes rules on the investors in these deals. Investors must first be state residents. Those who have an annual income and net worth of less than $100,000 are limited to investments of the greater of $2,000 or 5% of their annual income or net worth. Those with incomes or net worth of $100,000 or more may purchase up to the greater of 10% of their annual income or net worth, with a limit of $100,000. The income and net worth are to be calculated in accordance with the accredited investor guidelines under federal Rule 501 of Regulation D. The company must also establish a minimum goal offering amount and, if this amount is not met, the company must return all funds to investors.
Review the current Massachusetts Crowdfunding Exemption:
Here are just a few features for Massachusetts crowdfunding included in the CrowdForce platform software:
• State residency self-verification
• Driver’s license upload for verification
• Setting funding limits for non-accredited investors
• Allowing accredited investor participation
• Complete and simple document signing and management
• Integrated ACH payments
• Plug in your state escrow account
• Plugin in your broker services for accredited investments
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