Reg CF Advertising Regulations
When launching a Regulation Crowdfunding campaign, issuers must follow regulations set for by the U.S. Securities Exchange Commission (SEC) in regards to advertising. The regulations prevent companies from unfairly conditioning the market prior to their offering being filed with and approved by the commission.
This information was compiled on 5/25/2022 from the SEC website and does not constitute legal advice. It is recommended that you consult a licensed attorney for the most up-to-date legal requirements regarding equity-based crowdfunding and Regulation CF.
What is EDGAR?
EDGAR stands for the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system, and is the required method of filing a Form C prior to issuing a Regulation CF offering.
Did you know? The SEC requires that any and all communications regarding your crowdfunding effort be filed alongside your Form C through EDGAR.
General Restrictions and Requirements
The U.S. Securities Exchange Commission requires that all communications as part of a Reg CF offering meet specific criteria, regardless of type. Violating any of these restrictions and acting in such a way that can be construed as misleading your investors risks your company being deemed a “Bad Actor” and potentially incurring legal or financial penalties in addition to having your Form C filing rejected.
Maintain and Submit Records of All Communications
The U.S. Securities and Exchange Commission requires that any and all communications regarding your crowdfunding effort be filed alongside your Form C. To that end, it is important to retain records and copies of all communications made prior to your filing. In the event that you do not have material copies of your communications, you will be asked to provide a description of the communication as well as all disclosures given.
Keep Communications Honest and Free of Misleading Information
It is required that any communications present to investors about your crowdfunding offering be honest and presented in such a way as to not be misleading. This means that any advertising or communications must be free from hyperbole or unsubstantiated promises. Any information provided to investors about your offering must be able to be backed by facts or reasonable projections based on previous trends or data.
Refrain from Ramping Up Advertisements Prior to Filing
While companies may continue to engage in their normal advertising practices where such advertising does not mention that you are raising capital, rapidly increasing your advertising presence immediately prior to your funding round could easily be seen as conditioning the market and may result in your Form C filing being rejected and your company being declared a “Bad Actor” and barred from engaging in Regulation CF.
Allowed Advertising By Phase
Before Filing a Form C
Prior to filing a Form C through EDGAR, companies cannot engage in advertising regarding their potential offering except as part of a Testing the Waters process. No terms can be communicated to potential investors and all communications must be disclosed alongside your Form C.
After Filing a Form C
After filing your Form C and receiving approval, any Testing the Waters advertising must end immediately. Once a filing is approved, you can now begin promoting the offering through two forms of communication: Tombstone advertisements and Non-term advertisements.