Want to advertise to investors? A quick guide to the new SEC rules


The JOBS Act, a 2012 law intended to promote start-up and small business activity, is chugging forward. The latest piece to go into effect makes it possible for entrepreneurs to use advertising  — anything from tweets to t-shirts to TV — to seek investors for their company. Some start-ups are already exploring creative ideas, like putting T-shirts on window washers.

Here’s what you need to know:

In the 1930’s, the federal government banned private companies from advertising shares to prevent scams. The SEC has now lifted that ban, meaning entrepreneurs — anyone from start-ups to hedge funds — can use billboards and other types of ads to seek capital.

But only “accredited investors” — people worth more than $1 million (not counting their home)  or who make more than $200K a year — can buy shares. Companies have to take reasonable steps to ensure investors meet this criteria.

There are still some formal SEC requirements

Companies seeking money must file a Form D with the SEC 15 days before seeking investment. They must then file an amended form 30 days after the offering is terminated. The SEC will use these forms as data to evaluate the system. (The SEC’s full list of rules is here.)

Other important parts of the JOBS Act have yet to go into effect

The Jumpstart Our Business Start-ups law also contains a provision to let companies raise up to $1 million through crowd-funding — this would open up the door to all investors, no matter how small. Regulators, however, have yet to grant formal approval. But, for now, companies can still crowd-fund through sites like Kickstarter so long as they don’t grant equity in the company.

The advertising provisions are also likely to benefit companies like FundersClub, which lists companies seeking funding; in March, the SEC confirmed its business model was legal.

More useful reads

The Wall Street Journal profiles a popcorn start-up and others that describe how they plan to advertise — including T-shirts on window washers.

The New York Times has an overview of how the rules will affect the capital markets as well as quotes from critics.

Fortune has a detailed explanation of the rules and an argument of why a rush of scams is unlikely.



I view the SEC as a hypocritical lot, that is out to protect accredited investor/ seed capital investors position in the market place. (which are parading as seed capital investors, when in fact they are mezzanine investors, and the dreaded vulture investor is soon to be obsolete gone visa-vi “hedge fund.”

Andrew Stephenson

There is some misleading information in your article. First off, the rules are not yet effective. For the next 60 days, a general solicitation of a non-registered securities offering will land the company in trouble with the SEC–likely producing a cease and desist order that will follow the company as it tries to raise money in the future.

Additionally, the information collection in the Form D is just a proposed rule and is not a requirement for companies undertaking a Rule 506(c) offering until those rules are finalized.

For more information, we have put together a detailed memo on the new rules available at http://crowdcheck.com/sites/default/files/CrowdCheck%20Memo%20on%20Adoption%20New%20Regulation%20D%20Final.pdf

Richard Rodman (@rodmanrichard)

Great overview. It’s important to point out that this ruling makes it more difficult for an investor to prove his or her accredited status. They are now moving away from the “honor system” that currently proves an investors accredited status and moving toward services like Crowdentials that provides a confidential third party verification service.

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