Considering Regulation Crowdfunding’s Advertising Restrictions

by Stinson Leonard Street - Dodd-Frank and the Jobs Act

Robb Mandelbaum has a nice piece up at Forbes that digs into the advertising limitations that are imposed by Regulation Crowdfunding. The whole piece is worth a read, and it sparked reactions in me in a couple of spots.

CEOs and founders of startups are likely to have lots of trouble with the rules. The impetus for the article was Mandelbaum’s realization that a prior piece on the newly effective Regulation Crowdfunding, a company founder put his crowdfunded offering at risk of violating Regulation Crowdfunding by even agreeing to talk to Mandelbaum about the offering.  Indeed, the SEC’s C&DIs released May 16, 2016 state that a news story is subject to Regulation Crowdfunding’s advertising rules to the same extent as communications by the issuer if the issuer was directly or indirectly involved in the creation of the content. Many CEOs and journalists are likely not going to be aware of nuances of Regulation Crowdfunding’s advertising rules and may inadvertently violate them. We already run into this issue from time to time working on Rule 506(b) offerings, which do not permit any general solicitation.  CEOs and founders of startups are successful in part because they are good at selling a company’s story, and when they have an opportunity to tell the press about all of the great things that are going on, they rightfully seize on it.  But including discussions of the company’s ongoing fundraising that will allow it to do even more great things can be fatal to a Rule 506(b) offering.  Crowdfunded offerings present an even greater risk – the Regulation D prohibition on general solicitation is a font of clarity compared to Regulation Crowdfunding’s advertising rules.

Mandelbaum’s piece includes a quote from Darren Marble, CEO of CrowdfundX, a digital advertising agency that has advised on the successful Elio Motors Regulation A+ offering:

“The best way to raise money for equity crowdfunding is to sell your vision, mission, and values,” says Marble. “It’s the story. Think about it: you have an unsophisticated investor, who maybe isn’t really an investor to begin with, but is now able to invest. The average American wants to invest in companies that they believe in and entrepreneurs who have the same world view as they do.”

I think Mr. Marble has effectively stated the case for why the SEC is so concerned with equity crowdfunding in the first place – unsophisticated investors may make emotional decisions based on slick sales pitches rather than decisions that are based on a more fulsome understanding of the risks inherent in the investment.   The SEC wants investors to invest after reviewing information about the company’s history, capital structure, market and competitive position, financial history, sales data, debt load, litigation risk, and all of the other factors typically addressed in a full PPM through a funding portal; the SEC does not want investors to make the decision to invest based a professionally produced five minute marketing video delivered through Facebook.

I think the bottom line is that Regulation Crowdfunding suffers from a public misperception that has not been helped by the enthusiasm of its supporters. There is a perception that the SEC’s crowdfunding rules enable kickstartr type fundraising; there is a lack of understanding that, due to the numerous limitations and requirements of the rules, offerings under Regulation Crowdfunding are fundamentally different from what most people understand as “crowdfunding.”

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.

© Stinson Leonard Street - Dodd-Frank and the Jobs Act | Attorney Advertising

Written by:

Stinson Leonard Street - Dodd-Frank and the Jobs Act

Stinson Leonard Street - Dodd-Frank and the Jobs Act on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.