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Manta Research Reports that Most Small Businesses are Still Unaware of Crowdfunding as an Alternative Finance Option

29 Mar

Most notably, 23 percent have funded a business project using an alternative lender, other than a traditional bank, but only two percent report having ever used a crowdfunding platform

By Robert Hoskins

Columbus, Ohio – Even though the alternative financing market is expanding at an exponential rate, a new Manta business survey reveals that two-thirds of small business owners still do not think enough funding options are available. Additionally, 69 percent feel the funding environment has not improved in the past 12 months.

Small businesses slow to jump on the alternative financing bandwagon, but interest growing
Alternative funding opportunities, including crowdfunding, are growing at a rapid rate, but the survey showcases a cautious approach by small business owners. Most notably, 23 percent have funded a business project using an alternative lender (other than a traditional bank), but only two percent report having ever used a crowdfunding platform. Lack of awareness and persistent misconceptions may be the cause.

Manta Research Reports that Most Small Businesses are Still Unaware of Crowdfunding as an Alternative Finance Option

Manta Research Reports that Most Small Businesses are Still Unaware of Crowdfunding

The majority of small business owners who have obtained traditional loans note uncertainty regarding crowdfunding and alternative lending options. Thirty percent of respondents are unsure of the risks, another 20 percent don’t understand the technology associated with these alternative sources and 14 percent report they simply do not trust them. A small number believe crowdfunding sites and alternative lenders are too complicated, while others fear business failure with less traditional financing methods (seven percent and six percent, respectively).

Traditional financing options still most popular with business owners
Manta’s survey revealed that, despite a diversifying lending environment, small business owners overwhelmingly prefer traditional financing options. More than 70 percent of respondents have sought traditional bank loans, savings, credit cards, or help from friends and family to finance their business, while less than a quarter have utilized an alternative lender (other than a bank).

“Small business owners have more diverse options today than ever before when it comes to funding their business,” said John Swanciger, CEO, Manta. “However, we’re seeing a gap between what’s available and the perception among small businesses that the lending environment has not improved. Even though traditional bank loans are difficult to secure, small businesses are still apt to rely on them.”

Of the small business owners who financed their business through alternative lenders, 38 percent did so because they did not qualify for traditional bank financing. Nearly 20 percent sought alternative lending because they needed a small short-term loan, while nine percent recognized the fast access and convenience associated with alternative lending options, and seven percent wanted ongoing access to a credit line.

The survey results also showed that when small business owners received alternative financing, the amounts they borrowed varied greatly. Most (40 percent) borrowed $10,000 or less. Others aimed higher, with 27 percent borrowing $50,000 or more. Remaining respondents were split — 17 percent borrowed $10,000 – $20,000 and another 17 percent borrowed $20,000 – $50,000.

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Symbid Launches New Crowdfunding Network with 30,000 Investors for Providing Traditional and Alternative Finance to Start-ups and Small Businesses in Europe

9 Mar

The Funding Network is one of the first comprehensive online platforms for SME finance, providing entrepreneurs with direct access to equity and loan crowdfunding, bank loans, venture capital, angel investors and investment funds

By Robert Hoskins

Rotterdam, The NetherlandsSymbid, a go-to equity crowdfunding platform connecting small- and medium-sized enterprises (SMEs) to all types of funding, traditional and alternative, announced the launch of The Funding Network, which represents the next phase in the evolution of the peer-to-peer fundraising model in the European financial industry.

The Funding Network is one of the first comprehensive online platforms for SME finance

Symbid’s The Funding Network is one of the first comprehensive online platforms for SME finance

All over the world people are becoming better connected, creating cheaper, faster and easier access to products and services. Entire industries are being concentrated into single online destinations – termed ‘go-to’ platforms – disrupting as well as simplifying the way we live our lives.

The Funding Network is the first comprehensive online platform for SME finance, providing entrepreneurs with direct access to equity and loan crowdfunding, bank loans, venture capital, angel investors and investment funds. Built around user-friendly investing, monitoring and data tools that enable everyone to track the performance of companies 24/7, The Funding Network bridges the information gap between crowdfunding and traditional investment methods through standardized data protocols.

“Our mission at Symbid is to simplify the way small businesses are funded through technology that enables a more transparent and efficient way of doing business. The launch of The Funding Network in the home of the world’s first stock market is a step towards a more democratic financial future for us all,” said Korstiaan Zandvliet, CEO and co-founder of Symbid Corp. “As an early mover in crowdfunding, we pushed ahead with paradigm-shifting technologies that help to level the financial playing field for investors and entrepreneurs. This is a logical evolution for a financial industry still grounded in a traditional, vertical, offline way of operating. The Funding Network will be the most efficient capital market for private companies.”

The Funding Network gives entrepreneurs access to all forms of finance, while offering (private and institutional) investors full transparency on the potential risks and returns of their portfolio. Every entrepreneur connecting to The Funding Network is guided towards the right type of funding with professional financial advice. Meanwhile, investors can personalize their deal flow according to key business criteria, pinpointing the investment opportunities that matter to them. This produces the most effective capital allocation service possible, underpinned by standardized XBRL data streamed from accountant reporting systems.

With over 40 funding partners already connected including banks, venture capitalists, angel investors, 30,000 private (crowdfunding) investors and affiliate platforms, the launch of The Funding Network™ on March 4 is just the beginning for Symbid. A signed partnership with financial advisory firm Credion means the expected total transaction volume of The Funding Network™ in 2015 is $800 million. “Symbid aims to revolutionize the financial industry in a way that enables more people to connect, fund and grow. We have but one message: let’s invest in each other,” said Korstiaan Zandvliet.

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CrowdShed to Open New Equity Crowdfunding Site in London

12 Nov

According to the Nesta/Cambridge University UK Alternative Finance Industry report equity crowdfunding has grown by over 410% in 2014 in the United Kingdom

By Robert Hoskins

London, UKCrowdShed will offer rewards, lending and donation-based crowdfunding opportunities, focused on creative, academic, charity and cause-based projects. Equity funding will be added in 2015, with an ethos of making business better.   CrowdShed is set to challenge the established crowdfunding model and redefine how people find their funding and fund something new. With the backing of GLI Finance Crowdshed.com is now well placed to launch in Q3, 2014.

Crowdshed to Open New Equity Crowdfunding Site in London

Crowdshed to Open New Equity Crowdfunding Site in London

Crowdfunding is a nascent industry already dominated by a few key players, each with a niche business model concentrating around one specific area of crowdfunding. CrowdShed is different, creating a holistic environment that offers funders and fund-seekers the widest opportunity to create and locate the project that’s perfect for them.

This multifaceted approach offers unrivaled scope to introduce like-minded funders and fund-seekers – people who might not have connected except through CrowdShed. The equity crowdfunding site is also creating a real-world space to bring funders and fund-seekers together to work, grow ideas, find inspiration and hold events, informative SHEDtalks, and Q&A sessions.

CrowdShed received significant seed investment from GLI Finance Limited (GLIF), the London Stock Exchange listed specialist provider of finance to small and medium sized enterprises.

Geoff Miller, CEO of GLI Finance, said, “This exciting partnership continues the extension of our platforms and compliments and diversifies our exposure to the crowdfunding space, as CrowdShed will provide rewards, lending and donation-based crowdfunding opportunities as well as SME Finance.

CrowdShed is well positioned to become a leading player in Europe within this space and we are delighted they have chosen to partner with us. We look forward to building our partnership with them.”

Henry Freeman, CrowdShed CEO, stated, “It’s great that GLIF recognizes the inherent opportunity and growth potential of crowdfunding as a real alternative to traditional investment and fundraising channels. CrowdShed is democratizing the crowdfunding process for all and contributing not only to better business but also to the good of society as a whole. We don|t believe that concepts like fiscal success and social, corporate or environmental responsibility are mutually exclusive. The crowd is sustainable, carries momentum easily, is self-supporting and self-perpetuating, and has the power to affect change for the good. This is the heart of what we do at CrowdShed.”

Statistics for the crowdfunding market tell of rapid and continuing growth with an estimated global value of $5.1 billion for 2013, up 89% on 2012. Europe accounts for 35% of the market share with $945 million raised, up 65% on 2012. Growth in the US market was bigger still, up 105% to a total of $1.6 billion.

This driver of finance from wealthy and high net worth individuals is supported by recent research from the Nesta/Cambridge University Report into alternative finance which forecasts that the alternative finance market, comprising the entire crowdfunding industry in the UK, is expected to grow to £1.74bn by the end of 2014 with further projected growth to around £4.4bn in 2015.

According to the Nesta/Cambridge University UK Alternative Finance Industry report, released Monday 10 November, equity crowdfunding has grown by over 410% in 2014.

Dermot Finch of the Prince’s Trust admitted that crowdfunding is something the Trust is exploring, working with CrowdShed to help young people fund the business initiatives they’re developing. He pointed out that, “We’re helping lots of youngsters get back on their feet and trying to give them the confidence to follow their own business ideas and crowdfunding is the ideal source of capital for their ventures, combining a blend of equity and donor capital.”

The ideas that Kenyon developed whilst running his crowdfunding campaign – creative marketing, strong social media messaging, building up momentum quickly – clearly worked and in fact the Nesta report confirms that these are the types of qualities needed to deliver a successful crowdfunding campaign.

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WeCareCard Crowdfunding Credit Card Delivers a Simple, Seamless and Secure Way to Share the Wealth in Las Vegas

3 Nov

The cause-related fundraising site will offer a prepaid debit card to fundraisers to support them in times of hardships and celebrations

By Robert Hoskins

Las Vegas, Nevada – WeCareCard introduces the first-ever prepaid debit card tied to a crowdfunding platform. The first-of-its-kind patent pending technology will fulfill a crowdfunding campaign’s financial component by loading funds onto a WeCareCard Prepaid MasterCard rather than the traditional fulfillment method of check, bank account deposit or PayPal.

WeCareCard crowdfunding site delivers a simple, seamless and secure way to share stories of hardships or celebrations, connect networks and gather funds for those in need

WeCareCard crowdfunding site delivers a simple, seamless and secure way to share stories of hardships or celebrations, connect networks and gather funds for those in need

The idea of WeCareCard spurred from co-founders Jessica Weiss, a former nurse who consistently witnessed first-hand financial hardships caused by unexpected medical bills and Phillip Qualls, a Technology, Payments and Financial Services executive with more than 20 years of experience in the industry.

“I saw an opportunity to leverage my experience to revolutionize relational giving and gifting by leveraging crowdfunding, prepaid and patent pending technology. Announcing the card at the world’s premier destination for emerging payments and financial services organizations, made perfect sense.” said Qualls.

The Indiana-based cause-related crowdfunding site delivers a simple, seamless and secure way to share stories of hardships or celebrations, connect networks and gather funds for those in need. The WeCareCard Prepaid MasterCard serves as the money- management tool, welcomed at over 25 million MasterCard locations worldwide. The card will be delivered to fundraisers early in their WeCareCard crowdfunding campaign and funds will be loaded throughout the duration of the campaign, helping fundraisers manage the expenses related to their cause directly, quickly and easily.

“After our family suffered hardships associated with long-term illness, I began contemplating how I could help others through similar situations,” said Weiss. “I knew there had to be a simple, streamlined way to help more people locally, and nationally through an online platform and prepaid debit card.

WeCareCard has retained Atlanta-based FirstView Financial as their card processor and program manager. FirstView excels at innovation in the high-growth prepaid card and mobile payments arenas. Metropolitan Commercial Bank (New York, NY) will be the issuer of the WeCareCard Prepaid MasterCard.

We are very excited to be working with WeCareCard on this new crowdfunding and prepaid solution,” said Jerry Uffner, CEO of FirstView Financial. “This new platform will help serve a very large audience. There are so many people in need of immediate financial relief and we are just happy to be a part of the initiative that will help remove that burden as quickly as possible.”

Individuals and organizations interested in receiving funding through WeCareCard’s platform can click here to apply for consideration.

WeCareCard is the first-ever online fundraising platform tied to a prepaid debit card that empowers people from around the nation to raise funds for a variety of life-changing causes. The cause-related fundraising solution delivers a simple, seamless and secure way to share stories, connect networks and gather immediate funds for those in need through the WeCareCard Prepaid MasterCard. This prepaid card serves as a money management tool and is welcomed at over 25 million MasterCard locations worldwide.

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Mosaic Announces $100 Million Investment Facility with PartnerReGlobal

21 Oct

Financial Services Company to Provide Institutional Investment and Support Mosaic’s Rapid Growth in Home Solar Loans

By Robert Hoskins

Oakland, California – Mosaic Solar, a peer-to-peer solar finance company, announced that an affiliate of global reinsurer PartnerRe Ltd. (NYSE:  PRE) will provide up to $100 million in financing for Mosaic’s home solar loan program.

Under the terms of the facility, PartnerRe will finance the purchase of loans originated by Mosaic. The company also expects to continue to grow its successful peer-to-peer lending platform, which has already seen thousands of investors join the Mosaic community.

“Mosaic’s superior loan terms, user-friendly borrowing experience, and recent expansion into several new states throughout the U.S. have resulted in accelerating demand for capital sourcing for our homeowner loans beyond traditional crowdfunding,” said Bruce Ledesma, Mosaic’s Chief Operating Officer.  “We are thrilled to work with an experienced investment team to expand the availability of our lending capacity to solar installers and their customers throughout the country.”

“Mosaic has successfully created innovative loan products and technology-driven origination processes,” said David Moran, President of PartnerRe Principal Finance Inc.  “PartnerRe is impressed with the quality of consumer loans in Mosaic’s portfolio.  We look forward to beginning our financing arrangement and facilitating greater access to capital for the solar market consistent with our investment objectives.”

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Finance-Technology Company Receives $2 Million Crowdlending Loan from Denver-Based P2Binvestor

11 Jul

New Peer-to-Business lender pools investment from more than 350 accredited investors to provide receivables-based, no equity loss loans for businesses

By Robert Hoskins

Denver, CO – Representing one of the largest single crowdlending transactions ever, P2Binvestor (P2Bi) announced that the crowdlender provided a $2 million line of credit to a Boulder-based Finance-Technology (Fin-Tech) client.  This credit line adds to P2Bi’s rapid growth and puts the young company on a run rate to achieve a lending portfolio of $25 million by the end of its fiscal year.

New Peer-to-Business lender pools investment from more than 350 accredited investors to provide receivables-based, no equity loss loans for businesses

New Peer-to-Business lender pools investment from more than 350 accredited investors to provide receivables-based, no equity loss loans for businesses

P2Bi is a crowdlending platform that provides working investment capital via three types of asset-based loans to small and midsize businesses:

  1. a receivables-purchase product;
  2. an asset-backed line of credit, and;
  3. a credit line secured by future contractual revenue.

“Our easy online application process, quick funding decisions, competitive rates, and crowdfunding model are what set us apart,” said Krista Morgan, P2Bi’s Co-founder and COO. “But at the end of the day, clients love doing business with us because we are genuinely interested in helping them grow. Securing growth capital shouldn’t be a cumbersome process. We make it easier for borrowers.”

The company and its crowd of accredited investors have the capacity to fund multi-million dollar credit lines, lend to companies in all 50 U.S. states, and work with businesses in various industries including technology, staffing, natural foods, manufacturing, and more.

P2Bi provides access to this pool of working capital for innovative, growing companies. It eliminates many of the barriers associated with traditional financing and the high costs associated with subprime commercial lending. The company uses technology and crowdfunding to lower its effective cost of capital to clients.

Established in 2012, P2Bi officially went to market in January 2014. To date, the company has originated financing to clients in six U.S. states in various industries that include technology, energy, staffing, natural foods, and construction.

P2Bi and its crowd of accredited investors provide businesses with flexible capital that can grow with them; line increases are available as clients need them. The company stands behind its financing by offering a rate guarantee that allows clients to transition, penalty free, to a credit line or term loan with another financial institution if they find a better interest rate.

“P2Binvestor’s funding is a long-term solution that also helps us tremendously in the short term as we aggressively scale our product. It allows us to defer an equity raise, which would have been otherwise unavoidable,” said a company spokesperson for P2Bi’s newest client and recipient of the $2 million credit line. The Boulder company asked not to be named as it prepares for its official public launch.

Both companies are alumni of Finovate, a prominent demo-based conference for innovative startups and established companies in the fields of Banking and  Fin-Tech. Finovate hosts a two-day showcase each spring and fall where leading Fin-Tech companies and startups present their technology business models.

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hyperfund Launches Business Crowdfunding Site that Makes It Easy for Investors to Find, Research and Invest in Private Business Equity Deals

9 Jul

hyperfund offers crowdfunding site where businesses at any stage of the growth cycle can find and reach potential investors using crowdfunding advertising, email marketing, PR and social media campaigns

Anacortes, Wash. – hyperfund is a new business crowdfunding marketplace where investors can easily find, research and invest in private businesses. It is a crowdfunding site where entrepreneurs can easily and efficiently reach a large number of potential investors and is one of the first crowdfunding platform providing all three primary strategies for businesses raising capital on the internet with rewards, security, and debt crowdfunding options.

hyperfund enables entrepreneurs, startups as well as growing businesses to take advantage of the explosive growth of crowdfunding campaigns and leverage the power of the SEC’s new General Solicitation Rules that allow private companies to market their equity investment opportunities to millions of accredited investors via advertising, marketing, PR and social media programs.

Hyperfund Local National Crowdfunding for both Rewards and Equity Based Crowdfudning Campaigns

Hyperfund Local National Crowdfunding for both Rewards and Equity Based Crowdfudning Campaign

The investing ecosystem continues to evolve as traditional sources of funding, angel investors and venture capitalists, focus more on revenue-producing businesses. At the same time, new technologies enable new ways for growing companies to connect with potential investors. Crowdfunding is becoming a primary solution for pre-revenue businesses to raise capital and most crowdfunding platforms, to date, have only offered investors a single option.

hyperfund offers three different crowdfunding options:

  • Rewards, such as preferential product acquisition opportunities,
  • Security, to participate more directly in a company’s financial growth, and
  • Debt, to be repaid over time.

“Now startups and growing businesses can raise capital on the Internet with a reward-based seed funding round to validate their business model, followed by an equity or debt round on the same platform,” said hyperfund’s CEO Denis duNann. He emphasized, “On hyperfund’s marketplace, investors can now back business-focused rewards rounds, track the businesses performance and potentially invest in a later securities round.”

Luan Cox, CEO at partner company Crowdnetic, stated, “We are impressed with hyperfund’s unique and complete approach to business crowdfunding. The breadth of their offerings addresses the needs of small businesses throughout the growth cycle.” She added, “We are pleased to include their Private Issuers Publicly Raising (PIPR) listings in our marketwatch.com feed, the nation’s first real-time aggregated listing of offerings and pricing information on private issuers raising capital.”

There are no transaction or subscriber fees for investors to research private offerings on hyperfund. There are no upfront fees for entrepreneurs to easily and efficiently reach millions of potential investors.

hyperfund is launching with two recent winners of the Florida Atlantic University’s Business Plan Competition:

  • BiologicsDirect™, the first and only online virtual marketplace that connects blood centers, which are the suppliers of blood products, with hospital and blood center users, positively impacting critical blood-product supply chain management.
  • Owl Educators, with its breakthrough online service, connects tutors and students, making their educational relationship more effective and efficient.

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Estimated Crowdfunding Industry Growth Expected to Exceed $10 Billion in 2014

25 Jun

 Three new white papers aimed at financial advisors, asset managers and institutions to help them identify and understand new growth opportunities in crowdfunding, peer-to-peer lending and other opportunities in the alternative asset space

By Robert Hoskins

OAK BROOK, Ill. Millennium Trust Company released three new white papers aimed at financial advisors, asset managers and institutions to help them identify and understand new crowdfunding, peer-to-peer lending and other opportunities in the alternative asset space.

Estimated Crowdfunding Growth in 2014 Expected to Exceed $10 Billion

Estimated Crowdfunding Growth in 2014 Expected to Exceed $10 Billion

The first white paper, “New Opportunities In The Alternative Asset Marketplace” discusses what alternative assets are, provides an overview of the alternative asset marketplace, and reviews some of the challenges that have made it difficult for individual investors to access and understand alternatives.

The white paper dives into how uncertain financial markets and increased investor demand have led to regulatory changes that are transforming the alternative asset industry while simultaneously creating opportunities for innovative financial technology firms. The white paper highlights ways in which some responsive financial services firms – such as custodians that specialize in the custody of alternatives – are developing technology and service solutions to meet the rapidly changing needs of both institutions and investors.

The second white paper, titled “New Opportunities In The Alternative Asset Marketplace: Peer-To-Peer Lending” examines the ways that pioneering custody firms have been working to support the growing, yet relatively new, online peer-to-peer lending industry.

While media coverage has mostly looked at how the developing P2P space has caused a disruption in the traditional bank lending model, there has been little mention of how these changes have impacted the role of the industry’s critical service providers, including qualified custodians. This paper discusses this issue by examining what forward thinking firms are doing to address concerns about the safekeeping of client assets in this growing alternative asset class.

The third, “New Opportunities In The Alternative Asset Marketplace:  Crowdfunding” examines how relatively new investment opportunities presented by crowdfunding are becoming the best example of “creative destruction.” In other words, crowdfunding is becoming a disruptive force in the traditional model of how individuals and companies can secure capital by going directly to investors as opposed to long-established system of going to local banks or Wall Street.

New Opportunities In The Alternative Asset Marketplace:  Crowdfunding

New Opportunities In The Alternative Asset Marketplace: Crowdfunding

Driven by the credit crunch, investor demand for alternative investment opportunities, the JOBS Act and a growth in technology, this market has exploded in recent years. Of course, as this market continues to grow, today’s custodians must evolve along with it. Those that can’t, or those that don’t, will miss out on a potentially huge opportunity, finding themselves sitting on the sidelines unable to meet the needs of current and prospective clients.

“It is an interesting time to be involved in the alternative investment industry,” said Reggie Karas, Managing Director of the Alternative Solutions Group at Millennium Trust. “Education is almost always cited as a key concern for advisors and individuals who are looking to allocate to alternatives. As an independent custodian, we don’t give investment advice-or talk about the ‘why’-but we feel our custody work with many of the leading alternative investment platforms gives us unique insight into the ‘how.’  These white papers are a result of that work and are meant to offer an educated look into how these online marketplaces and supporting service providers are creating new opportunities for investors and to offer some basic education about alternative investments.”

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Top 10 Crowdfunding Sites Increase by an Average of 524% based on the United States Fastest Growing Internet Traffic Research Report

16 Jun

Over the past 12 months the top 10 crowdfunding sites have experienced exponential growth. Click here to research their website statistics to see what type of advertising, content marketing, email marketing, geographic locations, mobile wireless apps,  search engine results (SEO), social media, and referral partners are driving the world’s fastest growing crowdfunding rewards and equity investment websites

The Top 10 Fastest Growing Crowdfunding Sites in the United States Increase Internet Traffic by an Average of 524%

The Top 10 Fastest Growing Crowdfunding Sites in the United States Increase Internet Traffic by an Average of 524%


By 
Robert Hoskins


Austin, Texas
– Want to know who the Top 100 Fastest Growing Crowdfunding sites  in the world are? The graph above shows the top 10 crowdfunding sites based on their website’s internet traffic. From a competitive analysis standpoint it might make you wonder how these companies are growing at such a phenomenal rate.

What type of marketing campaigns are they running to achieve this success?  Advertising? Email Marketing? Affiliate Marketing? Referral Partners? Direct Traffic?  Search Engine Results?  Alexa provides a little bit of information, Compete has even less, but SimilarWeb is building a great business by providing a ton of competitive information that up and coming crowdfunding sites and crowdfunding campaign managers can use to improve their marketing efforts.

Want to see the competitive analysis marketing report for each of the sites below? Simply click the % link for each one and you’ll be able to see what type of marketing campaigns are driving these sites’ traffic, where that traffic is coming from, where their visitors are going next, plus a whole lot more.

For examples, scroll down to the bottom of this page to see what types of marketing programs are driving the top 10 crowdfunding site’s rapid acceleration of website traffic.

If you would like to receive an Excel Spreadsheet that has last year’s statistics, this year’s stats, as well as the list of the Top 100 Crowdfunding Sites sorted by overall global ranking, fastest growing and biggest losses in website traffic, then follow these instructions to receive a free copy:

     1st Follow @Crowdfunding PRclick here to send a Connect Request via Linkedin, or do both.

     2nd  Tweet us a message that says, “Please send me a copy of the #Top100CrowdfundingSites”

     3rd We’ll follow you back and send a Direct Message for your email address

    4th Want to improve your crowdfunding site’s results/ranking? Call us at (512) 627-6622. Front Page PR will put together an aggressive marketing program to improve your competitive position!

Overall Rank Top 10 Fastest Growing Crowdfunding Websites Past 12 Months
  #5 FundingCircle 1946%
  #3 Angel List 760%
  #8 YouCaring 597%
  #4 LendingClub 440%
#13 Crowdrise 429%
  #2 GoFundMe 360%
#10 GiveForward 355%
  #7 Quirky 222%
  #9 JustGiving 82%
#12 Kiva 52%

 

1st Place = FundingCircle

FundingCircle Top 10 Fastest Growing Crowdfunding Sites Worldwide

FundingCircle makes Top 10 List of Fastest Growing Crowdfunding Sites

2nd Place = Angel List

Angel List Top 10 Fastest Growing Crowdfunding Sites Worldwide

Angel List makes Top 10 List of Fastest Growing Crowdfunding Sites

3rd Place = YouCaring

YouCaring Top 10 Fastest Growing Crowdfunding Sites Worldwide

YouCaring makes Top 10 List of Fastest Growing Crowdfunding Sites

4th Place = LendingClub

LendingClub Top 10 Fastest Growing Crowdfunding Sites Worldwide

LendingClub makes Top 10 List of the Fastest Growing Crowdfunding Sites

5th Place = Crowdrise

Crowdrise makes Top 10 List of the Fastest Growing Crowdfunding Sites Worldwide

Crowdrise makes Top 10 List of the Fastest Growing Crowdfunding Sites

6th Place = GoFundMe

GoFundMe makes Top 10 List of Fastest Growing Crowdfunding Sites Worldwide

GoFundMe makes Top 10 List of Fastest Growing Crowdfunding Sites

7th Place = GiveForward

GiveForward makes Top 10 List of Fastest Growing Crowdfunding Sites Worldwide

GiveForward makes Top 10 List of Fastest Growing Crowdfunding Sites

8th Place = Quirky

Quirky makes Top 10 List of Fastest Growing Crowdfunding Sites Worldwide

Quirky makes Top 10 List of Fastest Growing Crowdfunding Sites Worldwide

9th Place = JustGiving

JustGiving makes Top 10 List of Fastest Growing Crowdfunding Sites Worldwide

JustGiving makes Top 10 List of Fastest Growing Crowdfunding Sites

10th Place = Kiva

Kiva makes Top 10 List of Fastest Growing Crowdfunding Sites Worldwide

Kiva makes Top 10 List of Fastest Growing Crowdfunding Sites Worldwide

 

CrowdCheck Offers Crowdfunding Compliance Management for New Reg. D and Accredited Investor Marketing Programs

12 Jul
CrowdCheck CEO Sarah Hanks

CrowdCheck CEO Sarah Hanks

By Sarah Hanks, CrowdCheck’s CEO

Adoption of New Rule 506(c): General Solicitation in Regulation D Offerings

From the CEO’s Desktop:  On July 10 the SEC complied with a mandate in the JOBS Act of 2012 to permit “general solicitation” in private securities offerings. In doing so, the SEC created an entirely new type of securities offering not required to be registered under the Securities Act of 1933. The SEC also adopted rules preventing “bad actors” from participating in private offerings, and proposed for public comment changes to Regulation D and Form D under the Securities Act that are intended to increase investor protection.

Offerings of securities in the United States must be registered with the SEC under the Securities Act or made in compliance with an exemption from registration. Rule 506, part of Regulation D under the Securities Act, is the most used exemption from registration of securities in the United States. The SEC estimates that in 2012 $899 billion was raised in transactions claiming the Rule 506 exemption. New Rule 506(c) Adopted The SEC voted to adopt amendments to Regulation D under the Securities Act to add new Rule 506(c).  Rule 506(c) offerings are technically private placements, made only to “accredited” investors.[1] In the past this has meant not just that accredited investors only could buy the securities, but also that the issuer could offer them to accredited investors only. Under the new rule, small companies and private investment funds and their intermediaries will be able to use “general solicitation” to reach accredited investors, which means they may advertise or publicize an offering on television, in newspapers, and most importantly over the internet. They may talk about the offering on talk shows and webinars, and they may promote the offering on social media. In doing so, however, they will be subject to the anti-fraud provisions of the federal securities laws, which prohibit misleading statements. If the proposals discussed below are adopted, the materials used in general solicitation (which is a very broadly defined concept, including most attempts to condition market interest in an offering) will also be subject to legending requirements. The JOBS Act required the SEC to remove the prohibition on “general solicitation or general advertising,” which has been part of Regulation D since its adoption in 1982, so long as the purchasers in an offering were all accredited.  The way the SEC has implemented this legislative mandate means that there will now be two different types of offering under Regulation D’s Rule 506:

  • Traditional Rule 506(b) offerings, which cannot use general solicitation, but in which up to 35 non-accredited investors can participate so long as they are provided with extensive information about the issuer of the securities, usually in the form of a private placement memorandum or PPM; and
  • New Rule 506(c) offerings, which can use general solicitation, but must be sold to accredited investors only, in which the market will let investors dictate the type of information that they need in order to make informed investment decisions.

The JOBS Act directed the SEC to lift the prohibition on general solicitation provided that all purchasers of the securities were accredited investors and the issuer took “reasonable steps to verify” that the purchasers were accredited, “using such methods as determined by the Commission.”  In its initial proposal the SEC declined to specify even a non-exclusive list of such methods, on the grounds that this would inhibit flexibility in the markets.  However, in the final rule the SEC provided more clarity and established a principles-based method of verification that expects issuers to look at, among other things:

  • The nature of the purchaser and the type of accredited investors the purchaser claims to be;
  • The amount and type of information the issuer has about the purchaser; and
  • The nature of the offering, including the manner in which the purchaser was solicited to participate and the terms of the offering, such as the minimum investment amount.

The SEC makes clear that the issuer should look to the facts and circumstances surrounding the offer and the issuer’s relationship with the investor, and that what will be required to constitute “reasonable steps” will change based on the circumstances. For example, offerings with high minimum cash investments might require less additional investigation than offerings with lower minimums, provided there are no facts to indicate that a third party is financing the purchase. The SEC also provided a non-exclusive list of methods the issuer could use to verify that a natural person meets the accredited investor requirements of 506(c). These methods are:

  • If verifying whether a purchaser qualifies on the basis of income, the issuer may use IRS records that report income (e.g., a Form W-2, Form 1099, etc.) for the purchaser for the two most recent years, along with written representation from the purchaser that they have a reasonable expectation that they will meet the income requirement this year as well.
  • If verifying whether a purchaser qualifies on the basis of net worth, the issuer may use bank statements, brokerage statements, other statements of security holdings, certificates of deposit, tax assessments and appraisals provided by independent third parties, provided the records are no more than three months old. The issuer must also use a credit report to assess the purchaser’s liabilities. The issuer must also get written representation from the purchaser that all liabilities necessary to make a net worth determination have been disclosed.
  • The issuer may rely on written confirmation from a third party that the third party has taken reasonable steps to verify the purchaser’s accredited status. The SEC specifically named broker-dealers, CPAs, attorneys, and SEC-registered investment advisers as acceptable third parties, but also stipulated that other third parties could be acceptable provided they take reasonable steps to verify that purchasers are accredited and the issuer has a reasonable basis to rely on that verification.
  • Finally, purchasers who invested in the issuer in a previous 506(b) offering as an accredited investor and remains an investor in the issuer’s 506(c) raise is deemed to satisfy the verification requirements if the issuer obtains certification from the purchaser that they qualify as an accredited investor at the time of sale.

While the SEC provided these four methods as a non-exclusive safe-harbor, the Commission was clear that these methods would not satisfy the verification requirement if the issuer or its agent has knowledge that the purchaser is not an accredited investor. Proponents of Rule 506(c) offerings believe that they will increase transparency, make it easier for small companies to raise capital and decrease companies’ administrative costs. Opponents argue that Regulation D was already a successful capital-raising mechanism (a recent study by the SEC showed a vibrant Regulation D market raising up to a trillion dollars in over 15,000 offerings a year, mostly in offering sizes under $1 million). They also worry that, in the words of Commissioner Aguilar at the meeting at which the new rules were first proposed, removal of the prohibition on general solicitation would be “a boon to boiler room operators, Ponzi schemers, bucket shops, and garden variety fraudsters, by enabling them to cast a wider net, and making securities law enforcement much more difficult.” Rule 506(c) presents opportunities and threats. Contacting a broader range of investors will become easier, and thus more offerings can be made and more investors can enter the market.  This will combine with the opportunities already presented by the internet to present investment opportunities on a more cost-effective basis, without using an extensive (and expensive) PPM. More intermediaries may enter the market.  But as the SEC pointed out in the release proposing the rules: . . . eliminating the prohibition against general solicitation could make it easier for promoters of fraudulent schemes to reach potential investors through public solicitation and other methods not previously allowed. This could result in an increase in the level of due diligence conducted by investors in assessing proposed Rule 506(c) offerings and, in the event of fraud, would likely lead to costly lawsuits . . . This increased awareness of potential fraud may mean that companies need to do more to establish their legitimacy and that intermediaries will seek to provide meaningful due diligence to distinguish themselves from their competitors. Moreover, liability under the securities laws for misstatements, both for issuers and their intermediaries, has not changed. Any person who makes an untrue statement of a material fact, or omits to state a material fact necessary in order to make the statements that are made not misleading, violates the anti-fraud provisions of securities law. This is true whether the statement is intentional or made recklessly. It is easy to imagine how an entrepreneur might make a thoughtless or overoptimistic statement with respect to his or her company in the informal context of social media. Space-constrained media like Twitter will pose particular challenges to presenting a balanced picture of the investment opportunity. Will the rule change mean that we see hedge funds advertising on late-night TV or Twitter campaigns for investments in startups? The impact of the new rule is likely to be more limited in that respect than some have predicted. Public registered mutual funds do advertise, but those advertisements tend to be staid and contain lots of “fine print” disclaimers prescribed by law; private funds will likely be just as constrained. Broker-dealers putting together Regulation D deals are already subject to FINRA rules with respect to their advertising and social media use, and these requirements have not changed. The anti-fraud laws discussed above should have a tempering effect on any overly-exuberant publicity attempts in either paid or social media. And the SEC will be watching. The SEC has established a “Rule 506(c) Work Plan” involving staff from all across the SEC, who will monitor the new Rule 506(c) market for fraud and compliance and to coordinate with state regulators. The effective date for the new rule will be in mid-September, 2013.[2] Rule 506(c) offerings will only be legal after that effective date.  The SEC views “gun-jumping” very harshly. Proposed Changes to Regulation D, Form D and Rule 156 In the interests of investor protection, the SEC proposed the following changes:

  • Requiring the filing of a Form D in Rule 506(c) offerings at least 15 days before the issuer engages in general solicitation (an Advance Form D). Form D is currently filed no more than 15 days after the first sale of securities in a Regulation D offering.
  • Requiring a closing amendment to Form D within 30 days after the termination (final sale or abandonment) of any Rule 506 offering.
  • Expanding the content of Form D to include website address, information about controlling persons of the issuer, the issuer’s type of business, issuer size, whether the filing is an Advance Form D or a closing amendment, securities identifier, information about the type of investor, and use of proceeds. New items would be added to the form to cover number and types of accredited investor, trading venue, whether a broker-dealer filed general solicitation materials with FINRA, identity of investment adviser (for pooled investment vehicles), the types of general solicitation to be used in 506(c) offerings, and the methods to be used for determining accredited status in 506(c) offerings.
  • Requiring written general solicitation material used in Rule 506(c) offerings to include specified legends and other disclosures. Private investment funds would need to use a special legend disclosing that the investors are not provided the protection of the Investment Company Act of 1940. Failure to use the proposed legends would lead to a disqualification from future Rule 506 offerings.
  • On a temporary basis, requiring issuers to submit written general solicitation materials used in Rule 506(c) offerings to the SEC for the SEC to monitor what sort of communications are being used. The SEC will not make a formal review of these materials, and submission is not a condition to the validity of the offering but non-compliance might lead to unavailability of Rule 506 for future offerings. The materials are not formally “filed” with the SEC and will not be available to the public. Submission would be via an “intake page” on the SEC website.
  • Disqualifying an issuer from relying on Rule 506 for one year if it has not complied, within the last five years, with the Form D filing requirements in a Rule 506 offering.
  • Amending Rule 156, which interprets the anti-fraud provisions of the securities laws in connection with sales communications used by investment companies, to apply to private funds and to mandate additional manner and content restrictions on general solicitation materials used by private funds. The SEC states that private funds “should now be considering the principles underlying Rule 156 to avoid making fraudulent statements in their sales literature” and that private funds are just as much subject to the anti-fraud provisions of the law as investment companies are.

Two points that might not be evident to non-securities lawyers:

  • “Written communications” under the securities law include videos, TV appearances, webcasts, website content, Tweets, Facebook posts and recorded songs about the offering. Anything digital or broadcast. (Rule 405 under the Securities Act.)
  • “General solicitation” is very broad concept and includes any attempt to create a market for the securities being offered.

The SEC stated that it needed further consideration following experience with offerings under the new rule before imposing any content restrictions on general solicitation materials, which several commentators had urged the SEC to adopt. The additional filing requirements are not particularly burdensome, and the legending requirements would reflect best practices even if they were not proposed to be compulsory. Likewise, the changes to Rule 156 reflect the SEC’s interpretation of the law as it stands now. The temporary requirement to submit general solicitation materials could fast become unwieldy both for issuers and for the SEC itself. Current practice in online Rule 506 offerings is to use various media in presenting an investment opportunity to investors, including videos, slide decks, graphic-heavy offering memoranda, due diligence reports and other supporting data. These items are prepared in many different formats. Add to these social media postings and other solicitation items (and it is not clear in what format these are to be submitted) and the opportunity for chaos is limitless. Unless the ”intake page” uses a robust document-handling system able to handle many extremely large files in every format in which it is possible to create documents (and the intake page feeds documents to an equally robust database), failed uploads, long loading wait times and garbled data files are inevitable. The intake page is apparently going to be available for voluntary submissions by the time Rule 506(c) is effective. It is quite possible that the SEC’s experience with voluntary submissions will cause it to rethink this proposal. One striking issue in light of the combination of rules that are adopted and rules that are merely proposed is that in September, companies and funds will be able to generally solicit with fewer restrictions, and then additional restrictions (legends, slightly stricter Form D filing requirements and information submission requirements) will kick in after the proposed rule changes are adopted. The SEC also asks whether the definition of accredited investor should be changed when the SEC is permitted to make such changes, which would not be until July 2014. The proposed changes are now open for a period of public comment, which ends in mid-September. “Bad Actor” Rules Adopted The SEC also adopted its final rules disqualifying “felons and other ‘bad actors'” from taking part in securities offerings made in reliance on Rule 506. The new rules were required by the Dodd-Frank Act of 2010, and the SEC first proposed these rules in May 2011. Prior to this rulemaking, Rule 506 did not impose any bad actor disqualification requirements. In contrast, the bad actor disqualification provisions under Rule 262 of the Regulation A exemption from registration has existed for decades. The new rules are based on the established Rule 262 bad actor disqualification provisions, modified to account for the statutory requirements of Section 926 of the Dodd-Frank Act and how the Rule 506 exemption differs from the Regulation A exemption in practice. The SEC’s new rules are set out in new paragraph (d) of Rule 506. The rules state that the Rule 506 exemption — including both “traditional” Rule 506(b) and new Rule 506(c) offerings — will not be available if the “covered persons” in an offering have triggered a disqualifying event. The new rules apply to a range of people (the “covered persons”) in an exempt offering made under Rule 506(b) or 506(c). On the issuer side, the covered persons under the rules include:

  • The issuer itself, its predecessors, and affiliated issuers;
  • Any director, executive officer, or other officer participating in the sale of securities (or the counterparts for such persons if the issuer is a partnership or LLC);
  • Any beneficial owner of twenty percent or more of outstanding voting equity securities; and
  • Any promoter connected to the issuer company at the time of sale.

With regard to intermediaries, the rule applies to:

  • Any investment manager of a pooled investment fund;
  • Any person who has been or will be paid remuneration for solicitation of investors; and
  • Any director and executive officer (along with the partnership and LLC counterparts) of the investment manager or solicitor.

The “disqualifying events” that will prevent a person from being involved in offerings made in reliance on Rule 506(b) or Rule 506(c) include:

  • Any felony or misdemeanor convictions, within the past ten years (five years for the issuer), in connection with the purchase or sale of any security, involving making a false filing with the SEC, or arising out actions as an intermediary, advisor, or solicitor. The felony or misdemeanor convictions must relate to prior involvement with the offer or sale of a security, interactions with the SEC, or conduct as a securities intermediary. The disqualifying convictions do not include all criminal convictions involving fraud or deceit.
  • Any court order, within the past five years,  which, at the time of the sale of securities under Rule 506(b) or Rule 506(c), restrains or enjoins a person from  engaging in practices in connection with a securities transactions, making false filings with the SEC, or acting as an intermediary, advisor, or solicitor. For disqualification under this item, the person must be subject to the court order; that is, specifically named in the order. Other people who may come under the scope of an order, but are not specifically named, will not trigger the disqualification.
  • Any final order of a federal or state financial regulator that, at the time of the sale of securities, bars the person engaging in the business, or associating with an entity, regulated by that regulator. Additionally, the disqualification is triggered by a final order, within the past ten years, based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct. The applicable financial regulators include a state securities commission, state banking or thrift regulator, state insurance commission, federal banking regulator, the U.S. Commodity Futures Trading Commission, and the National Credit Union Administration.
  •  Any SEC disciplinary order suspending or limiting the activities of a person at the time of the sale of securities. These could be suspensions or revocations of a person’s registration as a broker, dealer, or investment advisor, or limitation on those activities, or a bar from being associated with the offering of penny stock.
  • Any SEC cease-and-desist order, within the past five years, that at the time of the sale orders a person to cease and desist from committing, or committing in the future, a violation of federal securities laws. These cease-and-desist orders arise out of the commission of securities fraud (i.e., knowingly misrepresenting a fact or omitting a fact necessary to make a previous statement not misleading) or making an unregistered, non-exempt offer of securities in violation of Section 5 of the Securities Act.
  • Any suspension or expulsion from a securities self-regulatory organization for any act or omission to act that constitutes conduct inconsistent with just and equitable principles of trade. Securities self-regulatory organizations include registered national securities exchanges, and national securities associations. The rules do not make clear whether a suspension results in a permanent disqualification or only operates during the period of the suspension.
  • Any order to stop or suspend a registration statement or Regulation A offering statement within the past five years. The disqualification applies to any filer or named underwriter, and extends to parties that are under investigation by the commission at the time of the Rule 506(b) or Rule 506(c) securities offering.
  • Any Postal Service false representation order within the past five years, or temporary restraining order or preliminary injunction at the time of the sale of securities.

A covered person that is subject to a disqualifying event has the ability to petition the SEC and show good cause as to why the disqualification should not apply. The SEC notes specific situations where this may occur, such as a demonstration that a court order was entered without the person having an opportunity to challenge the order. Additionally, the disqualification event will not apply if the relevant court or regulatory authority indicates that the judgment or order should not bar the person from participating in a Rule 506(b) or Rule 506(c) securities offering. The rules also create a reasonable care exception for the issuer.  Under that exception, the issuer may establish that it did not know, and even in the exercise of reasonable care, could not have known that a covered person triggered a disqualifying event. The standard for reasonable care includes the issuer’s factual inquiry into whether any covered person triggers a disqualifying event. The requirements for a factual inquiry vary according to the issuer’s situation. An issuer with only a few executive officers and directors may be expected to have knowledge of its own covered persons.  Factual inquiries on intermediaries may be done by questionnaires, certifications, and background investigations, accompanied by contractual representations and covenants. The factual inquiry should be done at a time that allows the issuer to have a complete and accurate understanding of the absence of disqualifying events at the time of the securities offering.  As such, the inquiry should be done as close to the offering as possible without being unduly burdensome.  Further, ongoing or long-lived offerings may require additional factual inquiries done on a reasonable basis. The rule is designed to phase in after it becomes effective in mid-September, 2013.  Disqualification will only result from disqualifying events that occur after the effective date of the new rules.  Nevertheless, any disqualifying events triggered by an issuer or covered person that occurred prior to the effective date are subject to mandatory disclosure to potential investors.  It is conceivable that failure to disclose a past disqualifying event could result in the finding of securities fraud, which would then trigger the disqualification from reliance on Rule 506(b) or Rule 506(c) in future securities offerings. These new rules impose substantial requirements on issuers and intermediaries relying on the Rule 506(b) or Rule 506(c) exemptions from registration of securities.  Principally, issuers must establish that they have exercised reasonable care to discover whether any of the parties to a securities offering disqualify the issuer from utilizing the exemptions.  If a covered person triggers a disqualifying event, and the issuer fails to exercise reasonable care, that could lead to further securities law violations, triggering additional disqualifying events for the issuer, and thereby severely limiting access to the capital markets. * *** The following table compares the principal attributes of traditional placements under Rule 506, new Rule 506(c) offerings and offerings made under Rule 506(c)’s cousin, crowdfunding.  The SEC has not yet proposed its rules for crowdfunding, so additional restrictions are likely.

 Rule 506(b) offerings (traditional Regulation D)  New Rule 506(c) offerings  Crowdfunding (when legal)
Solicitation: Marketed directly to known investors without “general solicitation”; no internet solicitation Marketed over the internet; TV, advertisements and solicitation on social media permitted Marketed over the internet, but primary solicitation and disclosure happens on “funding portal”; publicity anywhere else (including social media) is restricted
Eligible issuers: Both SEC-registered and private companies can use exemption Both SEC-registered and private companies can use exemption Only companies not registered with the SEC can issue
Eligible investors: Up to 35 non-accredited investors permitted; no limits on accredited investors Only accredited investors may buy No restrictions on type of investors but they must show they understand their investment and are limited in dollar amount
Ascertaining investors’ status: Accredited investors typically self-certify Issuer may use various methods to “verify” accredited status; non-exclusive list of methods that may be relied on as meeting requirements Proposals to come
Offering size: No dollar limit on offering size No dollar limit on offering size $1m limit on offering size; SEC may decide not to include sales to accredited investors in that limit
Disclosure: Private Placement Memorandum typically used although not required if all investors are accreditedFiling Requirements: Form D (very short form with issuer and intermediary identity and offering description but no substantive disclosure) filed after offering starts Disclosure driven by market demands and liability concernsProposals would require earlier filing of Form D and additional amendment after closing; general solicitation materials proposed to be submitted informally to SEC Disclosure (including reviewed or audited financial statements) mandated by statute; additional disclosure likely to be mandatedFiling required with SEC; form to be determined
Liability: Liability under general Rule 10b-5 anti-fraud provisions for any person making untrue statements Liability under general Rule 10b-5 anti-fraud provisions for any person making untrue statements Rule 10b-5 liability plus Section 12(a)(2)-type liability for issuer, its officers and directors and anyone “selling” (including promoting) the offering
Resales: Securities are “restricted”; cannot be freely resold Securities are “restricted”; cannot be freely resold Very limited resales permitted for one year; may be designated “restricted” by SEC
Intermediaries: Intermediaries not required; any intermediaries used must be registered broker-dealers or entities exempt from B/D registration (such as VC Funds) Intermediaries not required; any used must be registered broker-dealers or exempt Intermediaries are compulsory; can be funding portals or broker-dealers

Need help making sure your Broker/Dealer or Crowdfunding Platform is meeting the new Crowdfunding compliance guidelines, contact CrowdCheck at:

# # #

CrowdCheck provides due diligence and disclosure services for online investments, including Regulation D offerings.  We help platforms and issuers ensure that their offering satisfies legal and industry requirements, including the new “Bad Actor” rules and ensuring that issuer statements are accurate and not misleading.  CrowdCheck also provides investors with the tools they need to avoid fraud and make an informed investment decision.  We combine “hands on” and high tech to create a right-sized yet powerful product that works with the reality of small businesses and needs of investors.  For more information please contact us at info@crowdcheck.com or visit us at www.crowdcheck.com.  The above does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice.


[1] Accredited investors include, in general, people with a net worth (excluding their residence) of $1 million, income of $200,000 a year (or $300,000 with their spouse), officers and directors of the issuer and various institutions that have more than $5 million in assets. The SEC is considering revising these standards, although it cannot make any revisions until July 2014.
[2] 60 days after publication in the Federal Register, which has not yet occurred.
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