BUFFALO, N.Y., July 10, 2013 (GLOBE NEWSWIRE) -- Today, the SEC adopted proposed rules to eliminate the ban on general solicitation in the private sale of unregistered securities. The adopted rules are pursuant to the Title II provisions in the Jumpstart Our Business Startups Act ("JOBS Act") passed in April 2012. In doing so, the SEC expressed that issuers may rely upon third-party services to perform accredited investor verification.
"Today, the SEC confirmed that issuers must take reasonable measures to verify the accredited status of investors, undercutting self-certification as an acceptable practice" according to CrowdBouncer CEO Bob Carbone, who is also a board member of the influential Crowdfund Intermediary Regulatory Advocates (CFIRA). "CrowdBouncer provides tools for automating the verification process. By using an intermediary that has integrated CrowdBouncer, issuers can protect against rescission liability by ensuring that investors are, in fact, accredited."
Under Rule 506 of Regulation D, the most widely used exemption from securities registration in private placements, all investors must be accredited to avoid certain onerous and costly disclosure requirements. Failing to ensure that all investors are accredited can set in motion a series of devastating events for an issuer. Under federal law, if an offering was not properly conducted pursuant to Regulation D, investors may have a rescission right, i.e., the right to undo the purchase of the securities and have their money refunded.
Section 201(a) of the JOBS Act directed the SEC to enact rules requiring issuers to take "reasonable" measures to verify accredited status of investors:
"Such rules shall require the issuer to take reasonable steps to verify that purchasers of the securities are accredited investors, using such methods as determined by the Commission."
CrowdBouncer delivers compliance services for Title II and Title III crowdfunding. Among these services is accredited investor verification through its best-in-class API for customers ranging from crowdfunding portals to back-end investment banking platforms. By implementing the CrowdBouncer API, intermediaries can verify in a fully automated fashion the requisite two years of income to confirm accredited investor status through income, as well as testing net worth via the evaluation of liquid assets on deposit in accounts.
"Our goal from the start has been to automate and economize the process of accredited investor verification and to eliminate redundant compliance costs across all portals," said Carbone. "The official SEC rules now mandate reasonable measures such as our API-delivered verification services and we are ready to deliver them for our customers. Our solution is the most cost-effective of its kind on the market."
CrowdBouncer is a Platform-as-a-Service (PaaS) solution for JOBS Act compliance and back-end transactional processing for equity crowdfunding portals. CrowdBouncer's API-driven solution provides equity crowdfunding portals with tools to institute compliance controls and integrate back-end closing processes. The company was formed in 2012 with assistance and financial backing from The InVentures Group, Inc. and Seed Capital Partners. Intermediaries may contact CrowdBouncer CEO Bob Carbone directly or via their website.
The materials on this document are provided for informational purposes only and do not constitute legal advice. The information is offered only for general informational and educational purposes. It is not offered as and does not constitute legal advice or legal opinions.
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