Regulation Crowdfunding: Guidance for Issuers

This resource represents the views of the staff of the Division of Corporation Finance. It is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved its content. This resource, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person. This resource does not provide legal advice.

Table of Contents

This guide is divided into the following parts:

1. Introduction

Under the Securities Act of 1933, the offer and sale of securities must be registered unless an exemption from registration is available. Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 added Securities Act Section 4(a)(6) that provides an exemption from registration for certain crowdfunding transactions. In 2015, the Commission adopted Regulation Crowdfunding to implement the requirements of Title III.[1] Under the rules, eligible companies were allowed to raise capital using Regulation Crowdfunding starting May 16, 2016.

On November 2, 2020, the Commission adopted certain amendments to Regulation Crowdfunding relating to the maximum offering amount, investor investment limits, special purpose vehicles, integration framework, and testing-the-waters communications as discussed below. 

2. Requirements of Regulation Crowdfunding  – Rule 100

In order to rely on the Regulation Crowdfunding exemption, certain requirements must be met.

1. Maximum Offering Amount of $5,000,000

A company issuing securities in reliance on Regulation Crowdfunding (an “issuer”) currently is permitted to raise a maximum aggregate amount of $5,000,000 in a 12-month period. In determining the amount that may be sold in a particular offering, an issuer should count:

• the amount it has already sold (including amounts sold by entities controlled by, or under common control with, the issuer, as well as any amounts sold by any predecessor of the issuer) in reliance on Regulation Crowdfunding during the 12-month period preceding the expected date of sale, plus
• the amount the issuer intends to raise in reliance on Regulation Crowdfunding in this offering.

An issuer does not aggregate amounts sold in other exempt (non-crowdfunding) offerings during the preceding 12-month period for purposes of determining the amount that may be sold in a particular Regulation Crowdfunding offering.

2. Non-accredited[2] Investors Subject to Limits [3]

Non-accredited investors are limited in the amounts they are allowed to invest in all Regulation Crowdfunding offerings over the course of a 12-month period:

• If either of a non-accredited investor’s annual income or net worth is less than $124,000, then the investor’s investment limit is the greater of:
  • $2,500 or
  • 5 percent of the greater of the non-accredited investor’s annual income or net worth.
• If both annual income and net worth are equal to or more than $124,000, then the non-accredited investor’s limit is 10 percent of the greater of their annual income or net worth,
• During any 12-month period, the aggregate amount of securities sold to a non-accredited investor through all Regulation Crowdfunding offerings may not exceed $124,000, regardless of the non-accredited investor’s annual income or net worth.

Spouses are allowed to calculate their net worth and annual income jointly. This chart illustrates a few examples of the investment limits for non-accredited investors:

Non-Accredited Investor Annual Income	Non-Accredited Investor Net Worth	Calculation	Investment Limit
$30,000	$105,000	Greater of $2,500 or 5% of $105,000 ($5,250)	$5,250
$150,000	$80,000	Greater of $2,500 or 5% of $150,000 ($7,500)	$7,500
$150,000	$124,000	10% of $150,000 ($15,000)	$15,000
$124,000	$900,000	10% of $ $900,000 ($90,000)	$90,000

3. Transactions Conducted Through an Intermediary

Each Regulation Crowdfunding offering must be exclusively conducted through one online platform. The intermediary operating the platform must be a broker-dealer or a funding portal that is registered with the SEC and FINRA. Issuers may rely on the efforts of the intermediary to determine that the aggregate amount of securities purchased by an investor does not cause the investor to exceed the investment limits, so long as the issuer does not have knowledge that the investor would exceed the investment limits as a result of purchasing securities in the issuer’s offering.

4. Eligibility

Certain companies are not eligible to use the Regulation Crowdfunding exemption. These include:

• non-U.S. companies;
• Exchange Act reporting companies;
• certain investment companies;
• companies that are disqualified under Regulation Crowdfunding’s disqualification rules;
• companies that have failed to comply with the annual reporting requirements under Regulation Crowdfunding during the two years immediately preceding the filing of the offering statement; and
• companies that have no specific business plan or have indicated their business plan is to engage in a merger or acquisition with an unidentified company or companies.

5. Definition of “Crowdfunding Vehicle” - Investment Company Act Rule 3a-9

Crowdfunding vehicles that satisfy the requirements of Investment Company Act Rule 3a-9 may be formed by or on behalf of a Regulation Crowdfunding issuer for investment in the issuer’s Regulation Crowdfunding offering. Investment Company Act Rule 3a-9 excludes from the definition of “investment company” under that Act a crowdfunding vehicle that meets certain conditions designed to require that it function as a conduit for investors to invest in a business that seeks to raise capital through a crowdfunding vehicle. The rules, among other things, seek to provide investors in the crowdfunding vehicle with the same economic exposure, voting power, and Regulation Crowdfunding disclosures as if the investors had invested directly in the crowdfunding issuer.

The crowdfunding issuer and the crowdfunding vehicle are Securities Act co-issuers jointly offering or selling securities such that the combined offering of the crowdfunding issuer’s securities and the crowdfunding vehicle’s securities must comply with Section 4(a)(6) of the Securities Act and Regulation Crowdfunding. These co-issuers are required to jointly file a Form C, providing all the required Form C disclosure with respect to the offer and sale of the issuer’s securities to the crowdfunding vehicle and the offer and sale of the crowdfunding vehicle’s securities to investors. An issuer that is both offering or selling securities with a co-issuer and separately offering or selling securities on its own must file and provide to investors and the relevant intermediary a separate Form C for such offering.

In 2020, the Commission amended Rule 100(d) to clarify that a crowdfunding vehicle is not considered an investor for purposes of Regulation Crowdfunding such that the individual investment limitations do not apply to the transfer of securities from the crowdfunding issuer to the crowdfunding vehicle. The Commission also adopted Exchange Act Rule 12g5-1(a)(9), which specifies that, for purposes of determining whether a crowdfunding issuer is required to register a class of equity securities with the Commission pursuant to Section 12(g)(1) of the Exchange Act, a crowdfunding issuer may exclude securities issued by a crowdfunding vehicle in accordance with Rule 3a-9 that are held by natural persons, but must include securities issued by a crowdfunding vehicle that are held by investors that are not natural persons. This same provision applies to a crowdfunding vehicle, which is a separate legal entity from the crowdfunding issuer and itself subject to Exchange Act Section 12(g).  

6. Testing the Waters – Rule 206

Prior to filing a Form C, a crowdfunding issuer may “test the waters,” or solicit interest in a potential offering from the general public, orally or in writing, provided that the solicitation materials state:

• No money or other consideration is being solicited, and if sent in response, will not be accepted;
• No offer to buy the securities can be accepted and no part of the purchase price can be received until the issuer determines the exemption under which the offering is intended to be conducted and, where applicable, the filing, disclosure, or qualification requirements of such exemption are met; and
• A person’s indication of interest involves no obligation or commitment of any kind.

Until the Form C is filed. solicitation or acceptance of money or other consideration, or of any commitment, binding or otherwise, from any person is prohibited. Any solicitation materials must be included with the Form C that is filed with the Commission.

7. Integration – Securities Act Rule 152

The integration doctrine provides an analytical framework for determining whether multiple securities transactions should be considered part of the same offering. This analysis helps to determine whether registration under Section 5 of the Securities Act is required or if the transactions can be conducted pursuant to an exemption from registration.

Securities Act Rule 152 provides a general principle of integration and four non-exclusive safe harbors from integration. Rule 100(e) of Regulation Crowdfunding provides a cross-reference to Rule 152. Depending on the particular facts and circumstances, an issuer may consider claiming reliance on any of the Rule 152(b) safe harbors from integration described below:

Safe Harbor 1 Rule 152(b)(1)	Any offering made more than 30 calendar days before the commencement of any other offering, or more than 30 calendar days after the termination or completion of any other offering, will not be integrated with such other offering; provided that, for an exempt offering for which general solicitation is not permitted that follows by 30 calendar days or more an offering that allows general solicitation, the provisions of Rule 152(a)(1) shall apply.
Safe Harbor 2 Rule 152(b)(2)	Offers and sales made in compliance with Rule 701, pursuant to an employee benefit plan, or in compliance with Regulation S will not be integrated with other offerings.
Safe Harbor 3 Rule 152(b)(3)	An offering for which a Securities Act registration statement has been filed will not be integrated if it is made subsequent to: (i) a terminated or completed offering for which general solicitation is not permitted; (ii) a terminated or completed offering for which general solicitation is permitted that was made only to qualified institutional buyers and institutional accredited investors; or (iii) an offering for which general solicitation is permitted that terminated or completed more than 30 calendar days prior to the commencement of the registered offering.
Safe Harbor 4 Rule 152(b)(4)	Offers and sales made in reliance on an exemption for which general solicitation is permitted will not be integrated if made subsequent to any terminated or completed offering.

Rules 152(c) and (d) provide guidance on when an exempt offering is deemed to commence and terminate.

For more information about Rule 152, see the Compliance Guide: Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital.

3. Issuer Disclosure  – Rules 201, 202 and 203

1. Form C

Any issuer conducting a Regulation Crowdfunding offering must electronically file its offering statement on Form C through the Commission’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system and with the intermediary facilitating the crowdfunding offering. A Form C cover page will be generated when the issuer provides information in XML-based fillable text boxes on the EDGAR system. Other required disclosure that is not requested in the XML text boxes must be filed as attachments to Form C. There is not a specific presentation format required for the attachments to Form C; however, the form does include an optional “Question and Answer” format that issuers may use to provide the disclosures that are required but not included in the XML portion.

2. Offering Statement Disclosure

The instructions to Form C indicate the information that an issuer must disclose, including:

• information about officers, directors, and owners of 20 percent or more of the issuer;
• a description of the issuer’s business and the use of proceeds from the offering;
• the price to the public of the securities or the method for determining the price, the target offering amount and the deadline to reach the target offering amount, whether the issuer will accept investments in excess of the target offering amount;
• certain related-party transactions; and
• a discussion of the issuer’s financial condition and financial statements.

The financial statements requirements are based on the amount offered and sold in reliance on Regulation Crowdfunding within the preceding 12- month period:

• For issuers offering $124,000 or less: Financial statements of the issuer and certain information from the issuer’s federal income tax returns, both certified by the principal executive officer. If, however, financial statements of the issuer are available that have either been reviewed or audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead and will not need to include the information reported on the federal income tax returns or the certification of the principal executive officer.
• Issuers offering more than $124,000 but not more than $618,000: Financial statements of the issuer reviewed by a public accountant that is independent of the issuer. If, however, financial statements of the issuer are available that have been audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead and will not need to include the reviewed financial statements.
• Issuers offering more than $618,000:
• For first-time Regulation Crowdfunding issuers offering not more than $1,235,000: Financial statements of the issuer reviewed by a public accountant that is independent of the issuer, unless financial statements of the issuer are available that have been audited by a public accountant that is independent of the issuer.
• For first-time Regulation Crowdfunding issuers offering more than $1,235,000 or issuers that have previously sold securities in reliance on Regulation Crowdfunding: Financial statements audited by a public accountant that is independent of the issuer.

3. Amendments to Offering Statement

For any offering that has not yet been completed or terminated, an issuer can file on Form C/A an amendment to its offering statement to disclose changes, additions or updates to information. An amendment is required for changes, additions or updates that are material, and in those required instances the issuer must reconfirm outstanding investment commitments within 5 business days, or the investor’s commitment will be considered cancelled.

4. Progress Updates

An issuer must provide an update on its progress toward meeting the target offering amount within five business days after reaching 50% and 100% of its target offering amount. These updates must be filed on Form C-U. If the issuer will accept proceeds over the target offering amount, it also must file a final Form C-U reflecting the total amount of securities sold in the offering. If, however, the intermediary provides frequent updates on its platform regarding the progress of the issuer in meeting the target offering amount, then the issuer will need to file only a final Form C-U to disclose the total amount of securities sold in the offering.

5. Annual Reports

An issuer that sold securities in a Regulation Crowdfunding offering is required to provide an annual report on Form C-AR no later than 120 days after the end of its fiscal year. The report must be filed on EDGAR and posted on the issuer’s website. The annual report requires information similar to what is required in the offering statement, although neither an audit nor a review of the financial statements is required. Issuers must comply with the annual reporting requirement until one of the following occurs:

• the issuer is required to file reports under Exchange Act Sections 13(a) or 15(d);
• the issuer has filed at least one annual report and has fewer than 300 holders of record;
• the issuer has filed at least three annual reports and has total assets that do not exceed $10 million;
• the issuer or another party purchases or repurchases all of the securities issued pursuant to Regulation Crowdfunding, including any payment in full of debt securities or any complete redemption of redeemable securities; or
• the issuer liquidates or dissolves in accordance with state law.

Any issuer terminating its annual reporting obligations is required to file notice on Form C-TR reporting that it will no longer provide annual reports pursuant to the requirements of Regulation Crowdfunding.

4. Limits on Advertising and Promoters – Rules 204 and 205

An issuer may not, directly or indirectly, advertise the terms of a Regulation Crowdfunding offering except in oral or written communications that directs investors to the intermediary’s platform and includes no more than the following information:

• a statement that the issuer is conducting an offering pursuant to Section 4(a)(6) of the Securities Act, the name of the intermediary through which the offering is being conducted, and information (including a link in any written communications) directing the potential investor to the intermediary’s platform;
• the terms of the offering, which means the amount of securities offered, the nature of the securities, the price of the securities, the closing date of the offering period, the planned use of proceeds and the issuer's progress toward meeting its funding target; and
• factual information about the legal identity and business location of the issuer, limited to the name of the issuer of the security, the address, phone number, and website of the issuer, the e-mail address of a representative of the issuer, and a brief description of the business of the issuer.

Although advertising the terms of the offering on the intermediary’s platform is limited to a brief notice, an issuer may communicate with investors and potential investors about the terms of the offering through communication channels provided on the intermediary’s platform. An issuer must identify itself as the issuer and persons acting on behalf of the issuer must identify their affiliation with the issuer in all communications on the intermediary’s platform.

An issuer is allowed to compensate others to promote its crowdfunding offerings through communication channels provided by an intermediary, but only if the issuer takes reasonable steps to ensure that the promoter clearly discloses the compensation with each communication.

5. Restrictions on Resales – Rule 501

Securities purchased in a crowdfunding transaction generally cannot be resold for a period of one year, unless the securities are transferred:

• to the issuer of the securities;
• to an “accredited investor;”
• as part of an offering registered with the Commission; or
• to a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance.

6. Exemption from Section 12(g)

Section 12(g) of the Exchange Act requires an issuer with total assets of more than $10 million and a class of securities held of record by either 2,000 persons, or 500 persons who are not accredited investors, to register that class of securities with the Commission. However, securities issued pursuant to Regulation Crowdfunding are conditionally exempted from the record holder count under Section 12(g) if the following conditions are met:

• the issuer is current in its ongoing annual reports required pursuant to Regulation Crowdfunding;
• has total assets as of the end of its last fiscal year of $25 million or less and
• has engaged the services of a transfer agent registered with the SEC.

As a result, Section 12(g) registration is required if an issuer has, on the last day of its fiscal year, total assets greater than $25 million and the class of equity securities is held by more than 2,000 persons, or 500 persons who are not accredited investors. In that circumstance, an issuer is granted a two-year transition period before it is required to register its class of securities pursuant to Section 12(g), so long as it timely files all of the annual reports required by Regulation Crowdfunding during such period.

An issuer seeking to exclude a person from the record holder count of Section 12(g) is responsible for demonstrating that the securities held by the person were initially issued in an offering made under Section 4(a)(6). For rules specific to SPVs, see the SPV section of this guide above.

7. Bad Actor Disqualification – Rule 503

Rule 503 of Regulation Crowdfunding includes “bad actor” disqualification provisions that disqualify offerings if the issuer or other “covered persons” have experienced a disqualifying event, such as being convicted of, or subject to court or administrative sanctions for, securities fraud or other violations of specified laws.

1. Covered Persons

Understanding the categories of persons that are covered by Rule 503 is important because issuers are required to conduct a factual inquiry to determine whether any covered person has had a disqualifying event, and the existence of such an event will generally disqualify the offering from reliance on Regulation Crowdfunding.

“Covered persons” include:

• the issuer, including its predecessors and affiliated issuers;
• directors, officers, general partners or managing members of the issuer;
• beneficial owners of 20% or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power;
• promoters connected with the issuer in any capacity at the time of: filing, any offer after filing, or sale; and
• persons compensated (directly or indirectly) for soliciting investors, including the general partners, directors, officers or managing members of any such solicitor.

2. Disqualifying Events

Disqualifying events include:

• Certain criminal convictions;
• Certain court injunctions and restraining orders;
• Certain final orders of certain state and federal regulators; Certain SEC disciplinary orders;
• Certain SEC cease-and-desist orders;
• Suspension or expulsion from membership in a self-regulatory organization (SRO), such as FINRA, or being barred from association with an SRO member;
• SEC stop orders and orders suspending the Regulation A exemption; and
• U.S. Postal Service false representation orders.

Many disqualifying events include a look-back period (for example, a court injunction that was entered within the last five years or a regulatory order that was issued within the last ten years). Whether a disqualifying event exists must be analyzed at the time of the filing of the offering statement and each sale pursuant to the offering statement. The look-back period is measured from the date of the disqualifying event – for example, the issuance of the injunction or regulatory order and not the date of the underlying conduct that led to the disqualifying event – to the date of the filing of an offering statement and each subsequent sale. Note that, with respect to any beneficial owner of 20% or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power, the issuer is required to determine whether a disqualifying event has occurred only as of the time of filing of the offering statement and not from the time of such sale.

Disqualification will not arise as a result of disqualifying events relating to any conviction, order, judgment, decree, suspension, expulsion or bar that occurred before May 16, 2016, the effective date of Regulation Crowdfunding. Matters that existed before May 16, 2016, are still within the relevant look-back period, and would otherwise be disqualifying are, however, required to be disclosed in the issuer’s offering statement.

3. Exceptions and Waivers of Bad Actor Disqualification

Regulation Crowdfunding provides an exception from disqualification when the issuer is able to demonstrate that it did not know and, in the exercise of reasonable care, could not have known that a covered person with a disqualifying event participated in the offering.

1. Reasonable Care Exception

The steps an issuer should take to exercise reasonable care will vary according to particular facts and circumstances. An instruction to the rule states that an issuer will not be able to establish that it has exercised reasonable care unless it has made, in light of the circumstances, factual inquiry into whether any disqualifications exist. The nature and scope of the factual inquiry will vary based on the facts and circumstances concerning, among other things, the issuer and the other offering participants. 

2. Determination of Issuing Authority

Disqualification will not arise if, before the filing of the offering statement, the court or regulatory authority that entered the relevant order, judgment or decree advises in writing – whether in the relevant judgment, order or decree or separately to the Commission or its staff – that disqualification under Regulation Crowdfunding should not arise as a consequence of such order, judgment or decree.

3. Waivers of Bad Actor Disqualification

Rule 503(b)(2) of Regulation Crowdfunding also sets forth that waivers of bad actor disqualification may be provided by the Commission if it determines, upon a showing of good cause, that it is not necessary under the circumstances that an exemption be denied.

8. Other Resources

Regulation Crowdfunding adopting releases can be found at the following links:

• 2015 Regulation Crowdfunding
• 2020 Amendments to Regulation Crowdfunding

Regulation Crowdfunding can be accessed on the electronic Code of Federal Regulations website.

Additional information regarding the application of Regulation Crowdfunding is available in the Division of Corporation Finance’s Compliance & Disclosure Interpretations.

You can also submit complaints or tips about possible securities laws violations on the SEC's tip or complaint.

9. Contacting the SEC Staff

The SEC staff is happy to assist with questions regarding Regulation Crowdfunding. For issuer questions, you may contact the Division of Corporation Finance's Office of Small Business Policy online or by telephone at (202) 551-3460. For intermediary questions, you may contact the Division of Trading and Markets, Office of Chief Counsel, at (202) 551-5777 [4].

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