Regulatory Update: Funding Portal Enforcement Actions (Regulation CF Regulatory Enforcement)
Since funding portal rules and regulations are still relatively new, there have not yet been many examples of FINRA or SEC enforcement actions related to funding portal activities. To keep you informed, DreamFunded Marketplace LLC, was sanctioned by FINRA and its co-founder and CEO were banned from association with any FINRA funding portal member. The Compliant (linked here) cites (10) ten potential regulatory violations and the recently released Hearing Panel Decision (linked here) provides valuable insights into FINRA’s interpretations of the applicable rules and regulations in light of the facts and circumstances of this particular matter.
The topics that are discussed in this enforcement announcement include communication materials related to tombstone, video clips, issuer forecasts, offering pages and more. The discussion also addresses topics ranging from failure to respond to FINRA requests to failure to supervise investments and offerings. The following is a listing of the alleged violations that are also discussed in the Hearing Panel Decision.
Failing to Provide Documents and Information – (FINRA Funding Portal Rules 800(a) and 200(a) and FINRA Rule 8210)
False or Misleading Issuer Communications – (FINRA Funding Portal Rules 200(c)(3) and 200(a) and Regulation Crowdfunding Rule 301(c)(2))
False or Misleading Funding Portal Communications – (FINRA Funding Portal Rules 200(b), 200(c)(2), and 200(a)
No Reasonable Basis for Believing Issuer Compliance (Regulation Crowdfunding Section 301(a) and FINRA Funding Portal Rule 200(a))
Failure to Perform Meaningful Background Checks – (Regulation Crowdfunding Rule 301(c)(1) and FINRA Funding Portal Rule 200(a))
Failure to Provide Investors With Notice of Material Changes – (Regulation Crowdfunding Rule 304(c)(1) and FINRA Funding Portal Rule 200(a))
Failure to Provide Investors With Notice of Change of Offering Deadlines – (Regulation Crowdfunding Rule 304(b)(2) and FINRA Funding Portal Rule 200(a))
Failure to Provide Investors With Notice of Required Information – (Regulation Crowdfunding Rule 303(d) and FINRA Funding Portal Rule 200(a))
Failure to Provide Investors With Notice of Completion of Transactions – (Regulation Crowdfunding Rule 303(f) and FINRA Funding Portal Rule 200(a))
Supervision (FINRA Funding Portal Rules 300(a) and 200(a) and Regulation Crowdfunding Rule 403(a))
