• Home /
• News Blog /
• Funding Portal Guide for Title III Equity Crowdfunding

Funding Portal Guide for Title III Equity Crowdfunding

---

In order to operate, a crowdfunding service intermediary is required to register with the Securities and Exchange Commission (SEC) either as a broker or funding portal. Funding portals are designed to be engaged in managing securities transactions for the accounts of others through an independent crowdfunding website. This article is provided as a compliance guide for such funding portals relying on Title III Equity Crowdfunding.

Funding Portal Registration

Pursuant to crowdfunding regulations recently set forth by the SEC, funding portals are required to register with the SEC. Portals are eligible to register beginning January 29, 2016, but are prohibited from engaging in any form of crowdfunding activities prior to May 16, 2016.

All registered funding portals are also required to become a member of a national securities association that is registered under Section 15A of the Exchange Act, however, at this time, only the Financial Industry Regulatory Authority (FINRA) is registered.

Register with the SEC

Before you register with the SEC, ensure that you reserve an entity name with FINRA so it?s not identical to an existing member's firm name. To do so, complete the Firm Name Reservation Request Form on FINRA's website.

File Form ID

Prior to registering with the SEC, funding portals will need to first file a Form ID through the SEC?s EDGAR system. The Form ID is used to request the following EDGAR access codes: Central Index Key (CIK), CIK Confirmation Code (CCC), Password (PW), and Password Modification Authorization Code (PMAC). EDGAR codes are used to submit form filings to the SEC. The Form ID has been amended to include ?Funding Portal? as a filer type, and the instructions will be modified to include the definition of a funding portal as well. Colonial can submit your Form ID application for you. For more information, visit our Form ID filing page or contact us.

File Form Funding Portal

After your Form ID application has been processed and accepted, and you have received your codes, you can officially register with the SEC by filing the Form Funding Portal. The Form Funding Portal is an application used to register a business as an authorized funding portal. The form requires information regarding the funding portal?s respective business, principals, control relationship, and their employees. The SEC has created three form types for the Form Funding Portal:

Your registration will become effective either 30 days after registration is received by the Commission, or after your funding portal has been approved for membership by FINRA. After your registration becomes effective, the information that is found on Form Funding Portal will be made available to the public via EDGAR, except for certain personally identifiable information or information with a potential for misuse. Colonial can file your Form Funding Portal forms for you. Please contact us to learn more.

Become a Member of FINRA

The SEC file number assigned to your funding portal is the number that allows you to gain access to the FINRA Entitlement program. Through the Entitlement program your funding portal will designate a Super Account Administrator. The Super Account Administrator (SAA) will be authorized to create, modify, and delete any account administrator and user accounts, as well as being held responsible for maintaining accounts. Only one SAA may be designated per account.

To designate an SAA, you must first complete the New Funding Portal Organization Super Account Administrator Entitlement Form. The signer of this form is required to be an Authorized Signatory of the company. After your form has been processed by FINRA, an SAA account will be created and a confirmatory email sent to both the Authorized Signatory, and the SAA, including your funding portals Organization ID#.

In order to replace or update your SAA, an Authorized Signatory must contact the FINRA Call Center (801-590-6500) and request an Update/Replace Funding Portal Organization SAA Form.

Fingerprint Processing

After designating an SAA, you must generally submit fingerprints for each partner, director, officer, or employee of your funding portal compliant to SEA Rule 17f-2. Your fingerprints need to include your portals Organization ID#.

If your funding portal needs to apply for an exemption under Rule 17f-2, contact Tom Etter, Division of Market Regulation of the Securities and Exchange commission at (202) 551-5713.

Fingerprint cards can be either purchased and mailed or submitted electronically. Using the Electronic Fingerprint Submission Program is much faster and requires no postage fees and lower processing fees for the fingerprint submissions.

FINRA will then submit fingerprints to the FBI and these results will be automatically updated.

Application Fees:

Application fees will only be accepted if wired directly to FINRA. Each funding portal application fee is $2,700.

More information about the application fees for funding portals can be found at //www.finra.org/industry/fp-how-to-apply.

Form FP-NMA

After completing all previous steps, you must submit Form FP-NMA, which provides information about your funding portal.

After submitting the completed application, FINRA will review it within 60 days. FINRA may conduct one or more membership interviews. If an application is withdrawn within 14 days, the application fee will be refunded.

After becoming a member of FINRA, FINRA will continue to provide ongoing surveillance of your funding portal as well as making an examination within the first 12 months of becoming a member, and at least once every four years thereafter.

SEC Limitations on Funding Portals

The JOBS Act has placed several restrictions on what a funding portal is eligible to do. Funding portals are not allowed to:

Both broker deals and funding portals are prohibited from:

Other Information and Allowances for Funding Portals

Here is some additional information about Funding Portal requirements and allowances set forth by the SEC.

Conclusion

As an SEC registered transfer agent and SEC filings provider, Colonial can be relied on by Funding Portals for their crowdfunding compliance needs. Here are some of the benefits of partnering with us:

Learn more or obtain a quote by contacting us at the top of the page.

View the final crowdfunding rule 33-9974.

Published: May 3, 2016

Author: Dan Carter