Where are all the crowdfunding portals?
The recently adopted SEC rule on the regulation of crowdfunding, as mandated by Title III of the JOBS Act, requires that such offerings be conducted through an online crowdfunding platform operated by a registered intermediary. Although old-school broker-dealers are technically allowed to act as such intermediaries, the rule also creates a new entity called a “funding portal” whose sole focus would be to host and facilitate the sale of crowdfunded securities.
Funding portals were eligible to register with the SEC beginning on January 29, 2016, using a new EDGAR form type called Form Funding Portal (indexed as “CFPortal”). And thanks to its press release, we know that at least one would-be funding portal, StartEngine Capital LLC, threw its hat into the ring immediately. But if you go to Securities Mosaic or sec.gov today and look for StartEngine Capital or any other funding portal, you’ll come up empty. So what gives? Where are all the crowdfunding portals?
In fact, the initial EDGAR submission is only an application for registration: the first step in a longer process. By rule, a minimum of 30 days must pass before the registration may be declared effective by the SEC–though in practice that period of time is almost certain to be longer, as the entity must separately apply to FINRA for acceptance as a fund portal. And that’s where things really get bogged down.
FINRA’s instructions make clear that applicants should file the initial EDGAR paperwork first, prior to initiating the FINRA application process. A prospective portal must then jump through a number of hoops–including paying fees, filling out initial paperwork, and even submitting fingerprints—before it will be allowed to fill out FINRA Form FP-NMA, the actual application for fund portal status. Only after that application is complete does the clock begin ticking on FINRA’s guaranteed 60-day window for turnaround. And given all the machinations that kick in following the receipt of an application – a preliminary review, requests for further information (and possibly amendments to the original form), an interview conducted by video conference– it seems unlikely this time frame would end up being greatly compressed.
Still, we can assume Form Funding Portal will be hitting EDGAR before too long, perhaps later this month or sometime in April. If you’re a Securities Mosaic subscriber, you can be one of the first to view the new filing, by signing up for a real-time SEC Filings alert on Form CFPortal. Although the filing does not currently pop up as an auto-suggest in our Form Type box (since it has not yet been filed), you can still create a query for it by manually entering form type name. Click here for a shortcut to the query that can then be set up as an email or RSS alert.