Crowdfunding State Law Reemption, Financial & Regulatory Requirements for Issuers

One of the important parts of Title III regulation CF of the JOBS Act, is that it actually preempts state law. All state blue sky laws that involve the registration of securities are eliminated, but that doesn’t mean you don’t have to pay a filing fee for certain things. There are two exemptions where states can still charge fees. First, if your company is domiciled in a state, that state can charge fees. Second, if you are selling more than 50% of your stock in a state, then they can charge you a notice filing fee.

Kendall Almerico
“One of the top Crowdfunding & JOBS Act attorneys in the country” Forbes magazine
Named 17th most influential thought leader in the crowdfunding industry, VentureBeat
“Top 19 Crowdfunding Experts Startups Need to Know” Inc. magazine

Mr. Almerico is CEO of BankRoll Ventures, who owns and operates BankRoll, an equity crowdfunding web site focused on Regulation A+ Mini IPOs and 506(c) and 506(b) private placements. Mr. Almerico is a regular crowdfunding columnist for and a highly sought after keynote speaker on both a national and international level.

In this CLE class clip, Mr. Almerico discusses state law preemption, financial & regulatory requirements for issuers.

Watch the Full Crowdfunding Law CLE Class

When the JOBS Act was passed, there was a tremendous amount of concern as to what the financial requirements were going to be for issuers. One of the biggest problems was, if you were an issuer and wanted to raise 100,000 or less all you have to do is file your tax returns with the FCC, or financial statements your CFO signed off on. From 100,000 to 500,000 you had to go to an independent CPA for an external review of your financial statements. However, if you wanted to raise 500,000 to a million dollars, you had to actually be fully audited. If you’re a startup business, and you’re interested in crowdfunding, the last thing you want to do is spend 25 to 30 thousand dollars for a full audit of your limited financial records.

The new law changed all that and made things decisively easier. Now, for a company that wants to raise up to 100,000 dollars, that stayed the same, you have to file your tax returns with the FCC. If you’re going to go up to 500,000 then you need your financial papers reviewed by a CPA. Going up to a million dollars and over, you don’t have to have the full audit the first time you use the law.

The regulatory requirements for raising money is really a pretty simple process. First, you fill out Form C, a multi-page form, that any CFO could fill out in a day and file it with the FCC. Though when it comes to explaining the risk factors, is where you might want to get professional assistance from an experienced attorney.