Title 17
SECTION 227.100
227.100 Crowdfunding exemption and requirements.
§ 227.100 Crowdfunding exemption and requirements. Link to an amendment published at 86 FR 3590, Jan. 14, 2021.(a) Exemption. An issuer may offer or sell securities in reliance on section 4(a)(6) of the Securities Act of 1933 (the “Securities Act”) (15 U.S.C. 77d(a)(6)), provided that:
(1) The aggregate amount of securities sold to all investors by the issuer in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) during the 12-month period preceding the date of such offer or sale, including the securities offered in such transaction, shall not exceed $1,070,000;
(2) The aggregate amount of securities sold to any investor across all issuers in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) during the 12-month period preceding the date of such transaction, including the securities sold to such investor in such transaction, shall not exceed:
(i) The greater of $2,200 or 5 percent of the lesser of the investor's annual income or net worth if either the investor's annual income or net worth is less than $107,000; or
(ii) 10 percent of the lesser of the investor's annual income or net worth, not to exceed an amount sold of $107,000, if both the investor's annual income and net worth are equal to or more than $107,000;
Instruction 1 to paragraph (a)(2). To determine the investment limit for a natural person, the person's annual income and net worth shall be calculated as those values are calculated for purposes of determining accredited investor status in accordance with § 230.501 of this chapter.
Instruction 2 to paragraph (a)(2). A person's annual income and net worth may be calculated jointly with that person's spouse; however, when such a joint calculation is used, the aggregate investment of the investor spouses may not exceed the limit that would apply to an individual investor at that income or net worth level.
Instruction 3 to paragraph (a)(2). An issuer offering and selling securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) may rely on the efforts of an intermediary required by § 227.303(b) to ensure that the aggregate amount of securities purchased by an investor in offerings pursuant to section 4(a)(6) of the Securities Act will not cause the investor to exceed the limit set forth in section 4(a)(6) of the Securities Act and § 227.100(a)(2), provided that the issuer does not know that the investor has exceeded the investor limits or would exceed the investor limits as a result of purchasing securities in the issuer's offering.
(3) The transaction is conducted through an intermediary that complies with the requirements in section 4A(a) of the Securities Act (15 U.S.C. 77d-1(a)) and the related requirements in this part, and the transaction is conducted exclusively through the intermediary's platform; and
Instruction to paragraph (a)(3). An issuer shall not conduct an offering or concurrent offerings in reliance on section 4(a)(6) of the Securities Act of 1933 (15 U.S.C. 77d(a)(6)) using more than one intermediary.
(4) The issuer complies with the requirements in section 4A(b) of the Securities Act (15 U.S.C. 77d-1(b)) and the related requirements in this part; provided, however, that the failure to comply with §§ 227.202, 227.203(a)(3) and 227.203(b) shall not prevent an issuer from relying on the exemption provided by section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)).
(b) Applicability. The crowdfunding exemption shall not apply to transactions involving the offer or sale of securities by any issuer that:
(1) Is not organized under, and subject to, the laws of a State or territory of the United States or the District of Columbia;
(2) Is subject to the requirement to file reports pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (15 U.S.C. 78m or 78o(d));
(3) Is an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3), or is excluded from the definition of investment company by section 3(b) or section 3(c) of that Act (15 U.S.C. 80a-3(b) or 80a-3(c));
(4) Is not eligible to offer or sell securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) as a result of a disqualification as specified in § 227.503(a);
(5) Has sold securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) and has not filed with the Commission and provided to investors, to the extent required, the ongoing annual reports required by this part during the two years immediately preceding the filing of the required offering statement; or
Instruction to paragraph (b)(5). An issuer delinquent in its ongoing reports can again rely on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) once it has filed with the Commission and provided to investors both of the annual reports required during the two years immediately preceding the filing of the required offering statement.
(6) Has no specific business plan or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies.
(7) Seeks to rely on § 227.201(aa) to conduct an offering on an expedited basis due to circumstances relating to coronavirus disease 2019 (COVID-19), where such offering is initiated between May 4, 2020, and February 28, 2021, or seeks to rely on § 227.201(bb), where such offering is initiated between March 1, 2021, and August 28, 2022, and:
(i) Was organized and had operations less than six months prior to the commencement of the offering; or
(ii) Sold securities in reliance on section 4(a)(6) of the Securities Act and has not complied with the requirements in section 4A(b) of the Securities Act (15 U.S.C. 77d-1(b)) and the related requirements in this part.
(c) Issuer. For purposes of § 227.201(r), calculating aggregate amounts offered and sold in § 227.100(a) and § 227.201(t), and determining whether an issuer has previously sold securities in § 227.201(t)(3), issuer includes all entities controlled by or under common control with the issuer and any predecessors of the issuer.
Instruction to paragraph (c). The term control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the entity, whether through the ownership of voting securities, by contract or otherwise.
(d) Investor. For purposes of this part, investor means any investor or any potential investor, as the context requires.
[80 FR 71537, Nov. 16, 2015, as amended at 82 FR 17552, Apr. 12, 2017; 85 FR 27131, May 7, 2020; 85 FR 54490, Sept. 2, 2020; 86 FR 3590, Jan. 14, 2020] Effective Date Notes:At 85 FR 27131, May 7, 2020, § 227.100 was amended by adding paragraph (b)(7), effective May 4, 2020, through Sept. 1, 2021. At 85 FR 54490, Sept. 2, 2020, § 227.100, was amended by amending paragraph (b)(7) introductory text by removing the date “August 31, 2020” and adding in its place the date “February 28, 2021”, effective Aug. 31, 2020 through Sept. 1, 2021.2. At 86 FR 3590, Jan. 14, 2021, § 227.100 was amended by revising paragraph (b)(7), effective Jan. 14, 2021 through Mar. 1, 2023.