According to Tennessee crowdfunding rules, all securities offered must be registered with the SEC and the Tennessee Securities Division. A business first files a “registration statement” with SEC and/or TNSD before it offers its securities for sale to investors. A registration statement is actually a set of docs, including a prospectus, describing the investment, and also an audited financial statement. Ultimately, the SEC and/or the TNSD can request modifications or deny the registration.
If a business meets requirements for exception, it is said to be “exempt from registration” meaning it does not need to register its securities. However, there are a number of rules that must be followed to qualify for this exemption.
One exemption is in the Securities Act of 1933. It details that a business is exempt from registration with the SEC if it meets certain conditions such as a company that is located within a specific state offering its securities for sale to investors who are residents of the same state. This exemption is called the “Intrastate Offering Exemption.”
Even if a business does qualify for the Tennessee crowdfunding Exemption, it still has to register its securities with the TNSD. However, starting in 2015, The Invest Tennessee Exemption (ITE) excludes this registration requirement. So if a Tennessee company qualifies for the Federal Intrastate Exemption, it will qualify for the ITE, allowing it to forego the registration process.
If you qualify for the exemption, you can use general solicitation methods including television, radio, print and internet to attract investors. And according to ITE you can sell investments to anyone, regardless of financial means, but with certain restrictions.
The Tennessee crowdfunding exemption has numerous advantages over proposed Jobs Act regulations
In 2013 when the SEC lifted the ban on general solicitation, it allowed businesses to raise money online publically. This means that you as a founder can now advertise your capital raise through the following:
A mass newsletter/email
A public profile on a startup investment platform
A company, personal or third-party website that displays openly that a startup is fundraising
Public speaking engagements, such as conferences, panels, or forums