Our Venture Capital & Emerging Companies practice group analyzed the SEC’s recently released equity crowdfunding rules (referred to by the SEC as “Regulation Crowdfunding”) in a concise and easy-to-digest article authored by Sam Effron and Kristin Gerber.

The article does a great job of highlighting some of the regulation’s shortcomings, such as the limits it places on amounts that can be raised (at both the company and investor level); the requirement that companies complete and file a new Form C; and certain ongoing reporting obligations for companies.  In all, the added costs, burdens, and risks associated with complying with this regulation means that in most cases there are better alternatives (such as raises under Rule 506) for start-up companies looking to access the capital markets.

Last week the SEC issued a no action letter that provides guidance and clarity as to how an issuer of securities can conduct a private placement in a password protected web page under Rule 506(b), without it being deemed a “general solicitation” and thereby being subject to the additional requirements imposed by the new Rule 506(c).  In the alert linked here, our colleagues Dan DeWolf and Sam Effron, who prepared the request to the SEC on behalf of CitizenVC, discuss the challenges faced by issuers seeking to offer securities through a private placement online and what issuers can do to take an offering outside of being considered a “general solicitation.”  This is cutting-edge information that can help issuers raise capital online without having to proceed under the more onerous requirements of Rule 506(c).