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FINRA Begins Voluntary Registration for Crowdfunding Portals

Joe Mont | January 14, 2013

Although the Securities and Exchange Commission has yet to issue crowdfunding rules optimistically expected by the end of the year, the Financial Industry Regulatory Authority has forged ahead with a voluntary, interim registration form for would-be crowdfunding portals planning to operate in accordance with the JOBS Act.

Crowdfunding websites,offering equity shares in start-up companies, may voluntarily submit information regarding their business models on the form as a precursor to formal registration. According to FINRA, the information received will help it develop rules specific to these portals after “engaging in an open dialogue” with the SEC. Once those rules are in place there will be a final funding portal application for FINRA regulation.

In applying for membership, crowdfunding portals will not be bound by the responses provided on the Interim Form. FINRA will treat information that prospective portals file on the interim form as confidential. A final form will be issued at a later date for formal registration.

The interim form asks prospective funding portals to provide the following information: ownership details; funding; management; business model; compensation; and all business relationships. FINRA is also asking prospective funding portals to supplement those details with any additional information or documents that may be considered helpful. Information is also sought on whether applicants have past criminal charges or have faced a pending, adjucated, or settled regulatory action by the SEC, Commodities Futures Trading Commission, federal or state regulators, or self-regulatory organization.

Last year, FINRA solicited comments on specific rules it should adopt for registered funding portals that become its members. It has also asked for comment on the application of existing rules to broker-dealers engaging in crowdfunding activities.