On May 7, 2012, the Securities and Exchange Commission (SEC) Division of Trading and Markets issued guidance to prospective crowdfunding intermediaries under the Jumpstart Our Business Startups (JOBS) Act (H.R. 3606) in the form of Frequently Asked Questions (FAQs). The FAQs are set forth on the SEC’s website. While much of the JOBS Act was intended to make capital raising easier for young companies, the SEC’s guidance makes it clear that the SEC remains concerned about crowdfunding. As such, the final rules are likely to create a fair amount of “friction” for young companies to raise capital for equity through crowdfunding.

The guidance provides that any entities proposing to serve as crowdfunding intermediaries, either as brokers or funding portals, must first register with the SEC and the Financial Industry Regulatory Authority (FINRA), even if such entity is already a registered broker-dealer. The SEC, however, has not yet released the rules to implement the crowdfunding provisions or the registration of intermediaries, and the rules are not due to be released until January 2013. So, until the SEC releases rules on the crowdfunding process (which may or may not be before January 2013), no one can act as an intermediary or take advantage of the crowdfunding statute. The rules, once released, will set forth the process to register with the SEC as an intermediary and become members of a national securities association that is registered under Section 15A of the Exchange Act (FINRA is currently the only national securities association that satisfies this criterion).