Regulation Crowdfunding
Regulation Crowdfunding is a federal exemption that permits eligible companies to raise up to $5 million in a 12-month period through an online SEC-registered broker-dealer or funding portal.
Securities crowdfunding is not ordinary crowdfunding
Regulation Crowdfunding, often shortened to Reg CF, allows eligible companies to sell securities online under a federal registration exemption.[1]
Unlike donation or rewards crowdfunding, investors receive an actual security, which can be equity, debt or another permitted instrument.
Every Reg CF transaction must occur through a single online intermediary that is either an SEC-registered broker-dealer or a registered funding portal.[1]
The offering limit
An issuer can raise up to $5 million in a rolling 12-month period under Regulation Crowdfunding.[1][3]
The SEC staff has clarified that the calculation looks to the timing of closings when applying that rolling period.[3]
That limit applies to the issuer's use of Regulation Crowdfunding, not to every other capital-raising exemption the company might separately use, subject to integration and other rules.
Form C and disclosure
Before selling, the issuer files Form C and provides required information to investors and the intermediary.[1][2]
Disclosure can include:
- business description
- management and ownership
- use of proceeds
- offering terms
- related-party transactions
- financial information
- risk factors
The financial statement requirements vary with the amount being raised and other circumstances.[2]
Investor limits
Accredited investors are not subject to the Regulation Crowdfunding investment limits that apply to non-accredited investors.[2]
Non-accredited investors face limits based on income and net worth under the rule.[1][2]
These limits address how much an investor can commit across Regulation Crowdfunding offerings over the applicable period. They are not an assessment that a particular deal is suitable.
Advertising is structured
Issuers can promote a Reg CF offering, but advertising outside the intermediary's communication channels is constrained by the rule.[2]
The details matter because social-media promotion can easily blur the line between a permitted notice and a broader investment pitch.
Resale restrictions
Securities purchased in a Regulation Crowdfunding transaction generally cannot be resold for one year, subject to specified exceptions.[1]
After that period, legal transferability can improve, but practical liquidity may still be poor.
A small private company can have hundreds of investors and still have no meaningful secondary market.
Ongoing reporting
Reg CF issuers generally have annual reporting obligations after the offering until one of the rule's termination conditions is satisfied.[2][3]
Investors should check whether the issuer is current rather than assuming the original campaign page tells the full story.
Common mistakes
“Crowdfunding means small donations.”
Not here. Regulation Crowdfunding involves securities.
“A registered funding portal approves the investment.”
No. Intermediary registration is not investment endorsement.
“The $5 million cap makes the company low risk.”
No. Offering size says little about business quality.
“After one year the shares will be liquid.”
No. Legal resale eligibility and market liquidity are separate.
Example
An investor evaluating a transaction involving Regulation Crowdfunding should identify the exact exemption, eligibility rule, disclosure framework and resale constraints that apply.
Professional note
For a Reg CF deal, scrutinize the Form C, capitalization, security terms, dilution, related-party transactions, intermediary communications and the issuer's plan for ongoing reporting. Campaign momentum should never substitute for security-level analysis.
Related terms
- Private Placement
A private placement is a non-public offering of securities conducted in reliance on an available exemption from registration under the Securities Act of 1933.
- Regulation D
Regulation D is a set of SEC rules that provides exemptions and safe harbors from Securities Act registration for qualifying securities offerings.
- Rule 506(c)
Rule 506(c) is a Regulation D exemption that permits general solicitation and advertising if all purchasers are accredited investors and the issuer takes reasonable steps to verify accredited status.
- Form D
Form D is an SEC notice filing used for offerings relying on Regulation D and certain other exempt-offering provisions.
- Regulation A
Regulation A is a Securities Act exemption that permits eligible issuers to conduct public offerings under either Tier 1, up to $20 million, or Tier 2, up to $75 million in a 12-month period.
- Accredited investor
An investor who meets SEC income or net worth thresholds and may access private offerings.
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Platforms related to this term
Sources
- U.S. Securities and Exchange Commission — Regulation Crowdfunding
- U.S. Securities and Exchange Commission — Regulation Crowdfunding: Guidance for Issuers
- U.S. Securities and Exchange Commission — Regulation Crowdfunding — Corporation Finance Interpretations
- Electronic Code of Federal Regulations — Regulation Crowdfunding