Crowdfunding Advertising in the Intrastate Crowdfunding Context

Suppose you want to run a crowdfunding offering for equity in Washington State. Suppose you have filed your Crowdfunding Form with the DFI and it has approved of your offering.

Crowdfunding Advertising

Can you advertise the offering?

There are multiple layers to the analysis.

First you have to comply with the Washington law. The Washington law requires that the DFI first approve of your advertising.

When you submit your Crowdfunding Form, you also have to submit a “copy of all advertising and other materials directed to or to be furnished to investors in this offering.” WAC 460-99C-040.

In addition, WAC 460-99C-250 requires the following with respect to advertising:

(1) All advertising directed to or to be furnished to investors in an offering under RCW 21.20.880 shall be filed with the director no later than seven days prior to publication or distribution.
(2) The following forms and types of advertising are permitted without the necessity for filing or prior authorization by the administrator, unless specifically prohibited.
(a) So-called “tombstone” advertising, containing no more than the following information:
(i) Name and address of issuer;
(ii) Identity or title of security;
(iii) Per unit offering price, number of shares and amount of offering;
(iv) Brief, general description of business;
(v) Name and address of broker-dealer or underwriter, or address where offering circular or prospectus can be obtained; and
(vi) Date of issuance.
(b) Dividend notices, proxy statements and reports to shareholders, including periodic financial reports.
(c) Sales literature, advertising or market letters prepared in conformity with the applicable regulations and in compliance with the filing requirements of the SEC, FINRA, or an approved securities exchange.
So, under Washington law, it is possible to advertise your offering.

What about federal law?

Federal law imposes more limitation on advertising crowdfunding offerings. You can find the SEC guidance at the following links:
This guidance generally prohibits the unrestricted posting of crowdfunding advertising on the Internet. However, the guidance allows you to post to web sites if you restrict viewers to residents of the state.

Question: Can an issuer use its own website or social media presence to offer securities in a manner consistent with Rule 147?

Answer: Issuers generally use their websites and social media presence to advertise their market presence in a broad and open manner so that information is widely disseminated to any member of the general public. Although whether a particular communication is an “offer” of securities will depend on all of the facts and circumstances, using such established Internet presence to convey information about specific investment opportunities would likely involve offers to residents outside the particular state in which the issuer did business.

We believe, however, that issuers could implement technological measures to limit communications that are offers only to those persons whose Internet Protocol, or IP, address originates from a particular state or territory and prevent any offers to be made to persons whose IP address originates in other states or territories. Offers should include disclaimers and restrictive legends making it clear that the offering is limited to residents of the relevant state under applicable law. Issuers must comply with all other conditions of Rule 147, including that sales may only be made to residents of the same state as the issuer. [October 2, 2014]

This advice from the SEC is very helpful. Thus, you can advertise your offering, if you follow these rules. But you will want to be extremely careful to follow this advice and not inadvertently advertise your offering more broadly on the Internet.

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