Crowdfunding Basics
              What Crowdfunding Is:  the solicitation of growth capital in 
              relatively small amounts from a broad base of providers over the 
              internet.
              Types of Crowdfunding
              •  Rewards – purchase or pre-purchase by customers of 
                 products, promotional items (i.e. mugs, t-shirts, etc.), 
                 recognition, founder access, etc. – largely unregulated
              •  Capital Raising – the sale of debt or equity securities - 
                 regulated
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                      Traditional Securities Law Regime
                      Origins of Securities Laws – the Great Depression
                      Principal U.S. Laws Governing Securities
                      •   Securities Act of 1933 – regulates the offer and sale of securities.
                      •   Securities Exchange Act of 1934 – requires reporting for public companies, 
                          regulates securities trading on securities exchanges, contains key antifraud 
                          provisions relating to securities transactions and is the source of the regulatory 
                          framework that governs exchanges, brokers, dealers and other market 
                          participants.  
                      •   Blue Sky Laws - state securities laws that, if not pre-empted, present additional 
                          regulations of securities issuances, transactions and market participants.  
                      •   Philosophy – demand disclosure of material information to allow investors to 
                          make informed decisions and hold promoters and issues accountable.
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              Traditional Securities Law Regime
              US Securities Regulators
              •  Securities and Exchange Commission – the principal federal 
                 regulatory authority.
              •  State Securities Regulators – each state has its own state 
                 securities bureau or agency that is in charge of that state’s 
                 blue sky laws and regulations.
              •  FINRA (Financial Industry Regulatory Authority) – a self-
                 regulatory body that governs certain market intermediaries 
                 such as brokerage firms and securities representatives (stock 
                 brokers).    
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              Traditional Securities Law Regime
              Definition of a Security – Section 2(a)(1) of the Securities Act 
              lists a number of financial instruments including stock, bonds, 
              notes and investment contracts.
              SEC v. W.J. Howey Co. - under the Howey test, an investment 
              contract is “a contract, transaction or scheme whereby a person 
              invests his money in a common enterprise and is led to expect 
              profits solely from the efforts of the promoter or a third party.”
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                      Traditional Securities Law Regime
                      Securities Act 
                      •   Regulates the offer and sale of securities.  
                      •   Section 5 requires the registration of securities unless an exemption applies.
                      •   Unless a registration statement has been filed with the SEC, offers of securities 
                          are prohibited.
                      •   Filing of a registration statement has traditionally been a long and expensive 
                          process requiring audited financial statements and detailed information about 
                          the issuer and its principals.
                      •   Unless an exemption applies, sales can be made when the registration 
                          statement becomes “effective” – which generally means thoroughly reviewed 
                          by the SEC.
                      •   Once the securities are registered, the issuer generally becomes subject to the 
                          reporting requirements under the Exchange Act (i.e. a listed stock).  
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