Saturday, May 23, 2015

Illinois Approves Intrastate Crowdfunding

As one author noted, "Here are some of the main points of the Illinois Intrastate Crowdfunding Bill (HB 3429).

Adds new definition of 'accredited investor' which is now tied to the federal definition (see new 815 ILCS 5/2.34).

Amends the transaction exemption provided by 815 ILCS 5/4(H) to allow for offers, sales and/or issuances of securities to any 'accredited investor' and for the general promotion of the same (to the extent specified in the Bill).

Provides new definition of  'qualified escrowee,' which includes title insurance companies and banks authorized to do business in Illinois who maintain at least one (1) physical location in the state (see new 815 ILCS 5/2.35).

Provides new Intrastate Crowdfunding Exemption (see 815 ILCS 5/4(T)). Highlights include:
$1,000,000 funding cap unless the Issuer has made available to prospective purchasers audited financial statements, in which case the funding cap will be $4,000,000. – See subsection (2)
Max amount received by an issuer from any particular purchaser (other than accredited investors) is limited to $5,000 per year. – See subsection (3).

Requires use of a 'qualified escrowee' for the collection of funds from potential purchasers. – See subsection (8).

Requires the issuer, and each internet portal used, to establish commercially reasonable measures for limiting access to information to residents of Illinois. – See subsection (11).

Allows for 'general announcement' of offering by issuer. – To be in final administrative rules.
Requires delivery (or electronic access to) internally prepared quarterly financial statements/business reporting of issuer.  – To be in final administrative rules.

Provides new definition of 'registered internet portal.' (see 815 ILCS 5/2.36).

Establishes new provision related to offerings made through a 'qualified internet portal' (see 815 ILCS 5/8d). Highlights include:

Provides for an exemption from registration as a 'dealer' or 'investment adviser' under the Act for an internet portal that meets certain requirements. Specifies certain actions which do not, by themselves, constitute offering investment advice or recommendations. – See subsection (b).

The portal shall be owned by an entity organized, or otherwise qualified to do business, in Illinois and in good standing. – To be in final administrative rules.

Allows for 'general announcement' of offering by internet portal. – To be in final administrative rules."

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