FundersClub and AngelList: Recent No-Action Letters in the Online Funding Platform Space


Earlier this spring, the SEC issued no-action letters to two venture capital/angel online funding platforms, FundersClub and AngelList. The letters suggest that the business models employed by these two companies—running a platform that connects investors with investment opportunities — would, in and of itself, not require broker-dealer registration as long as there is no transaction-based compensation involved.

For those unfamiliar with no-action letters, they may be submitted to the SEC to determine whether a particular product, service, or practice would constitute a violation of federal securities law. The response from the SEC generally states whether or not SEC staff would recommend that the agency take enforcement action based on the facts and representations described in the request.

It is important to highlight that no-action relief is limited to the requester and the specific facts and circumstances set forth in the request.

In this case, AngelList and FundersClub outlined their business structures. FundersClub seeks to operate an online venture capital platform involving pre-screened start-ups seeking accredited investors, while AngelList seeks to do the same using an angel capital platform. The letters are available here (AngelList) and here (FundersClub) for the specifics.

 Here’s what we can take away from the no-action letters:

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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