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Florida Entrepreneurs Await Crowdfunding

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A new source of Internet-based funding may soon be available to Florida’s more than 2 million small businesses. Crowdfunding (also known as crowd financing, equity crowdfunding, or hyper funding) is defined as “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.”

Entrepreneurs from Miami’s Latin American gateway, to Boca Raton’s growing list of corporate headquarters, as well as the I-4 corridor connecting Tampa and Orlando, should be aware of a voluntary Interim Form for Funding Portals designed for prospective crowdfunding portals under the JOBS Act.

Venture capitalists and entrepreneurs who want to launch a funding portal may now voluntarily submit information to the Financial Industry Regulatory Authority (FINRA) regarding their business on the interim form. The information received will help FINRA develop rules specific to crowdfunding portals.

FINRA and the SEC are engaging in an open dialogue about the rules that should apply to funding portals. Once the SEC and FINRA have adopted funding portal rules, FINRA will issue 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 is committed to ensuring that the capital-raising objectives of the JOBS Act are advanced in a manner consistent with Congressional intent and investor protection. Crowdfunding portals that file this form will provide FINRA with important information regarding portal business models, which will inform our rulemaking,” said Thomas Selman, Executive Vice President, Regulatory Policy.

The Interim Form asks prospective funding portals to provide information including:

  • ownership;
  • funding;
  • management; and
  • business model and relationships.

FINRA is also asking prospective funding portals to supplement the information in the interim form with any additional information or documents that they believe would be helpful. FINRA will treat information that prospective portals file on the interim form as confidential.

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

Florida ranked #2 in the country for its favorable business climate, behind only Texas, in Chief Executive’s 2012 eighth annual survey of CEOs. Crowdsourcing is likely to get a lot of attention in Florida, given the state’s commitment to expanding business opportunities.

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