Checklist for Influencers and Marketers of Equity Crowdfunding Offerings

This checklist is for equity crowdfunding influencers and marketers interested in marketing, advertising, promoting, publicizing Reg CF, Reg A+, or Reg D 506(c) exempt offerings that are found on funding portals, through broker dealers, or direct through an "Invest Now" button on a company's website. Not legal or financial advice, just a starting point to help you out.

December 9th, 2023 by Russ Urban

✅ Compliance: As a Marketer, Influencer, Paid Third Party.

✅ Marketers and Issuers must follow the marketing and advertising rules concerning offerings. Whether that is Reg CF, Reg A+, or Reg D 506(c)

✅ This means you must follow these same rules as a third party hired for marketing / promoting / advertising / publicizing an equity crowdfunding offering.

✅ It is important to have respect for the rules, respect for the Issuer, other parties involved, and to protect yourself as a marketer. Refer to "Bad Actor" Disqualification and "Covered Persons".

✅ Don't be tempted into doing something that is against regulations. Don't do it. Someone else may be breaking the rules, but do not be tempted by their actions. A rule being broken may not be appearing to be (or not being) enforced, but the rule has to be followed anyways. Enforcement lags behind the rules being broken, sometimes years after.

✅ There are different sets of rules for Reg CF, Reg A+, Reg D 506(c).

✅ General Rules: Specific to Reg CF, Reg A+, Reg D 506(c) Marketing.

✅ Any compensation you receive absolutely should not be based on whether investors invest or not in an advertised offering. "Success Fees" are not allowed.

✅ Language and terms in contracts with clients absolutely should not entail "transaction-based" compensation on whether or not others invest in an advertised equity crowdfunding offering.

✅ Always be on the side of caution, a conservative rather than aggressive approach in any gray area when it comes to compliance.

✅ Study the JOBS Act, Reg CF, Reg A+, Reg D 506(c) exemptions, and SEC / FINRA regulations. You must also pay attention to new regulations and rules that are created. Follow the current legislation and rules in place for each Title exemption (Title II: Rule 506 of Regulation D, Title III: Regulation CF, Title IV: Regulation A+) as well as the overall spirit and letter of the JOBS Act and Securities Regulations.

✅ Disclose any business relationships (and their respective nature) that are material to any paid compensation.

✅ Disclosure: Always Disclose.

✅ It's proper and ethical to disclose your bias as a paid marketer of equity crowdfunding offerings and also required under Section 17(b) of the Securities Act.

✅ Refer to Best Practices for 17(b) disclosure by CrowdCheck and refer to the "Advertising and marketing agencies", "Bulletin boards", and "Suggested disclosure" sections.

✅ Reg CF Specific Rules: Specific to Reg CF Marketing.

✅ Refer to Rule 204 of Regulation Crowdfunding (Advertising Rules) and the Regulation Crowdfunding, General Rules and Regulations.

✅ Issuer's file a Form C with the SEC to raise via a Reg CF offering.

✅ Reg CF offerings are for non-accredited and accredited investors.

✅ Do not mix the terms of a Reg CF offering with non-terms of a Reg CF offering (and vice versa).

✅ The terms of a Reg CF offering by an Issuer that filed a Form C include: 1) the amount of securities offered; 2) the nature of the securities; 3) the price of the securities; 4) the closing date of the offering period; 5) the planned use of proceeds; and 6) the issuer’s progress toward meeting its funding target.

✅ A Terms Tombstone Notice (terms advertisement) can contain one or up to all of these six terms.

✅ A Reg CF terms notice may also include other 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.

✅ Make sure terms and non-terms do not mix on the same medium at the same time period.

✅ Both Terms and Non-Terms content must direct potential investors through a link to the intermediary’s platform to the page where the offering is taking place with the name of the intermediary and that an offering is taking place. For a Terms Communication -- a statement such as (but not limited to): "Company X is offering up to X Amount under Section 4(a)(6)/Reg CF with security type Equity at X Platform [hyperlink]." For a Non-Terms Communication -- a statement such as (but not limited to): "Company X is conducting an offering under Section 4(a)(6) at X Platform [hyperlink]."

✅ For content refer to publicly available company materials: 1) Form C, and 2) offering page.

✅ More information on the Terms of a Reg CF offering can be found at Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets and 17 CFR § 227.204 - Advertising.

✅ Test the Waters (TTW) for Reg CF: Test the Waters advertising is now permitted for prospective Reg CF Issuers (before a Form C is filed) under the requirement that such communications include an appropriate legend that states: (1) no money or other consideration is being solicited, and if sent in response, will not be accepted; (2) no offer to buy the securities can be accepted and no part of the purchase price can be received until the Form C is filed and only through an intermediary’s platform; and (3) a person’s indication of interest involves no obligation or commitment of any kind.

✅ Always include a Disclosure, see "Disclosure" above.

✅ Reg A+ Specific Rules: Specific to Reg A+ Marketing.

✅ Refer to General Solicitation for Reg A+ (Title IV of the JOBS Act) and Regulation A under the Securities Act of 1933 (Section 3(b)(2) of the Securities Act).

✅ Issuer's file a Form 1-A with the SEC to raise via a Reg A+ offering.

✅ Reg A+ offerings are for non-accredited and accredited investors.

✅ As always, it is important that the materials are fair and balanced and not misleading. Risk Factors for the offering are typically found in the Offering Circular which is part of the 1-A filing.

✅ Always include a live clickable link to the latest Offering Circular (with the words "Offering Circular" linked) along with a separate hyperlink to the named Platform hosting the offering.

✅ Include a statement such as (but not limited to) that the company is conducting an offering under Section 3(b)(2) (Reg A+) at X Platform [hyperlink].

✅ With Reg A+ advertising and communications, combining of non-term and terms of an offering is allowed, unlike Reg CF.

✅ For content refer to publicly available company materials: 1) solicitation materials, 2) Form 1-A, 3) offering page.

✅ Test the Waters (TTW) for Reg A+: In Test the Waters for Reg A+, all advertising and solicitation materials must bear a legend or disclaimer stating that: (1) The issuer is considering an offering of securities under Regulation A+ of the Securities Act, which is still in the planning stages and has not yet been registered with the SEC; (2) No money or other consideration is being solicited, and if sent in response, will not be accepted; (3) No offer to purchase the securities can be accepted and no part of the purchase price can be received until the offering statement is qualifed by the SEC; and (4) A potential investor’s indication of interest involves no obligation or commitment.

✅ Always include a Disclosure, see "Disclosure" above.

✅ Reg D 506(c) Specific Rules: Specific to Reg D 506(c) Marketing.

✅ Refer to General Solicitation for Reg D 506(c) (Title II of the JOBS Act) and Section 4(a)(2) of the Securities Act and Rule 506(c).

✅ Issuer's file a Form D with the SEC to raise via a Reg D 506(c) offering.

✅ Reg D 506(c) offerings are for accredited investors only.

✅ Include a statement such as (but not limited to) that the company is conducting an offering under Section 4(a)(2) & Reg D Rule 506(c) at X Platform [hyperlink].

✅ For content refer to publicly available company materials: 1) final offering materials, 2) Form D, 3) offering page.

✅ Note that with Reg D 506(c) advertising and communications, combining of non-term and terms of an offering is allowed, unlike Reg CF.

✅ If available by the Issuing Company, the Private Placement Memorandum (PPM) should be linked to for prospective investors to read. The PPM is a risk disclosure document concerning a Reg D 506(c) offering.

✅ Test the Waters (TTW) for Reg D 506(c) (a different concept than Reg CF & Reg A+ Test the Waters): Under Reg D 506(c), issuers can generally solicit and advertise to accredited investors. The key compliance requirement is to file Form D with the SEC within 15 days after the first sale of securities. This first sale is usually marked by an investor's commitment, such as signing a subscription agreement. Ensuring this Form D is filed within 15 days of the first sale is crucial for maintaining compliance with SEC regulations.

✅ Always include a Disclosure, see "Disclosure" above.

✅ Language / Messaging / Copywriting: Always Pay Attention and Double Check Your Language, Messaging, Copywriting.

✅ Revise messaging and language based on tone, 100% accuracy, and maintain clarity of your messaging.

✅ Pay attention to nuances and details.

✅ Don't use exaggeration / hyperbole / aggressive statements such as "To The Moon" or usage of emojis such as the following emojis: rocketship, unicorn, moneybags, stock chart emojis. To be safe, lay off emoji usage in general. This goes for images that could be misleading or misnformation as well.

✅ If operating a newsletter and trying to gain subscribers (or anywhere for that matter), do not use call to action text such as claiming that 100x return is possible or some extreme outlier case like Apple being founded in a garage then reaching a $3 trillion market cap. These both would be misrepresentation of the potential of equity crowdfunding offerings. Equity crowdfunding is not similar to either case. This also applies to content that is sent out to the subscribers. Issuer's do not and should not want to be entangled with newsletters that make such outrageous claims.

✅ This is not crypto! Equity Crowdfunding is a highly regulated industry (and was from the get go with the JOBS Act of 2012). Securities laws (The Howey Test) also apply to crypto which were flouted by many for years.

✅ You are not an investment advisor, broker dealer, funding portal, issuer, or financial analyst. Do not say "buy" or "invest now". Stick to the facts that the company has presented through their filing(s) and at their offering page.

✅ This Checklist Is Meant To Be A Starting Point: Always speak with an attorney before marketing an equity crowdfunding offering.

✅ This checklist is just meant to be a starting point and should not be relied on as your guide for marketing equity crowdfunding offerings.

✅ Create at least a mini-disclaimer for use on social media profile areas, websites, and for other mediums.