The Financial Industry Regulatory Authority (FINRA) is responsible for regulating the securities industry and overseeing broker-dealers in the United States. Part of this responsibility includes granting licenses to firms that want to operate as crowdfunding portals under Regulation Crowdfunding (Reg CF), which is a set of rules issued by the U.S. Securities and Exchange Commission (SEC) that allows small businesses to raise capital from a large number of investors through the internet. Because Reg CF is a federal regulation, it is up to FINRA to ensure that firms seeking to operate as crowdfunding portals meet the necessary requirements and are in compliance with the rules set forth by the SEC.

*Written by OpenAI's ChatGPT* 

Yes, it is possible that AI could have an impact on the field of investment crowdfunding. AI can be used to process large amounts of data quickly and accurately, which could be useful for analyzing potential investment opportunities and making predictions about their success. Additionally, AI could be used to automate many of the tasks involved in managing a crowdfunding campaign, such as identifying potential investors and tracking progress toward fundraising goals. However, it is also important to consider the potential drawbacks of using AI in this context, such as the potential for bias in decision-making and the need for effective regulation to protect investors.

*Written by OpenAI's ChatGPT* 

Thanks!

Yes, you can solicit as to what terms people might find attractive, including valuation. I would generally include a disclaimer of some kind saying that just because something has been suggested it doesn't mean that will be reflected in the deal terms if you eventually make an offering.

Sara

TLDR;  "Fees & Fines"

FINRA is a purportedly not-for-profit membership based organization but their Revenue and Expenses are not easily discernible, at least not in public sources like CharityNavigator:

https://www.charitynavigator.org/ein/521959501

FINRA likely generates the vast majority of its income from membership fee's that include a percentage of funds placed through the member firm.  It's easy to guess that Goldman Sachs is the largest contributor here and your average funding portal is not.

We could probably get a good guesstimate based on the number of member firms, states registered in, and the public bragging FINRA does about the fines it levies, though the vast majority of those fines are likely procedurally levied and privately not disclosed unless you scoured the public accounting of the member firms and see if they reported them in their expenses.

FINRA also manages the Central Registration Depository or CRD (aka brokercheck) and likely gets some funding from federal and state regulators to prop it up.  Ironically the OTC reporting facility is managed by NASDAQ, thus forcing firms to pay a minimum of $500/month to a "competitor" for the privilege of supplying trade data to FINRA.

Expenses could also likely be surmised based on the number of locations

https://www.finra.org/about/locations

likely rents and on the number of employees (3,600) and the average salary information which is disclosed in their rotating job posts that constantly need filling due to the high turn over rates.  See Glassdoor for former employee sentiment:

https://www.glassdoor.com/Reviews/FINRA-Reviews-E108071.htm

With the year over year decline for over a decade in the number of registered reps and broker-dealers it is just a matter of time before the organization will be forced to downsize, as it is now there are more employees at FINRA than there are firms to monitor:

https://www.thinkadvisor.com/2021/05/25/number-of-registered-reps-falls-for-fifth-straight-year-finra/

Your average funding portal contributes about $2,200 per year and napkin math based on the number of registered portals in good standing suggests that they probably all combined contribute a maximum of $250,000 year to the top line -- even if we generously doubled it to $500K it is clear that funding portal operations is likely losing money for the organization based on the composition and likely compensation of that group. 

It is certainly true of the vast majority of broker-dealers of which some numbers suggest that up to 90% of the membership base are "small member firms" which has lead some current and former members suggesting that you'll get better treatment at your DMV than you will as an average member firm.

Most of the problems FINRA has it creates for itself, and could likely be solved with two simple changes to their operating and membership agreements:

1. Provide Model Documents for their member firms, and
2. Establish Service Level Agreements

Things I have long publicly advocated.

There is certainly room for a competitor SRO in the US, and one likely based on a cooperative model where the actual costs of operations are disclosed and fee's apportioned to members based on actual usage.  Your local power company, for example, is ALSO a licensed monopoly but must obtain approval from the granting authority to set or raise rates.

At the end of the day, the SEC cannot simply offer us "choice" in the form of "do you want it or not" -- especially given the arbitrary and capricious manner in which FINRA unequally enforces the rules.  The two items I called out above would go a long way to curing that and improving member relations.

-dvd

Yes!  It is amazing how common it is for founders to publicly pitch investments in their companies.  This is not always illegal.  There are some securities exemptions under which this is allowed (e.g. Regulation Crowdfunding (but with some limitations) and Rule 506(c)).  But most founders have not consciously chosen a securities exemption so they may inadvertently be breaking the law.

The issuer must post on its website an annual report along with its financial statements certified by the principal executive officer of the issuer to be true and complete in all material respects and a description of the financial condition of the issuer. 

If, however, an issuer has available financial statements that have either been reviewed or audited by a public accountant that is independent of the issuer, those financial statements must be provided and the certification by the principal executive officer will not be required. 

The annual report also must include the disclosure required by paragraphs (a), (b), (c), (d), (e), (f), (m), (p), (q), (r), and (w) of Section 201 of the Reg CF Rules.

The report must be filed no later than 120 days after the end of the fiscal year covered by the report. 

The issuer must continue to comply with the ongoing reporting requirements until one of the following occurs:
(1) The issuer becomes a public reporting company;
(2) The issuer has filed, since its most recent sale of securities under the crowdfunding exemption, at least one annual report and has fewer than 300 holders of record;
(3) The issuer has filed, since its most recent sale of securities under the crowdfunding exemption, the required annual reports for at least the three most recent years and has total assets that do not exceed $10,000,000; (4) The issuer or another party repurchases all of the securities issued under the crowdfunding exemption, including any payment in full of debt securities or any complete redemption of redeemable securities; or (5) The issuer liquidates or dissolves its business in accordance with state law.

The issuer must file with the Commission and provide to investors and the relevant intermediary a Form C: Progress Update (Form C-U) to disclose its progress in meeting the target offering amount no later than five business days after each of the dates when the issuer reaches 50 percent and 100 percent of the target offering amount.  This requirement shall not apply to an issuer if the relevant intermediary makes publicly available on the intermediary’s platform frequent updates regarding the progress of the issuer in meeting the target offering amount.

The issuer must file an annual report on Form C: Annual Report (Form C-AR) no later than 120 days after the end of the fiscal year covered by the report. 

An issuer eligible to terminate its obligation to file annual reports must file with the Commission, within five business days from the date on which the issuer becomes eligible to terminate its reporting obligation, Form C: Termination of Reporting (Form C-TR).

A platform can set parameters for the type of company and offering it will accept. And then it can (indeed, must) deny access if it believes there is potential for fraud or if the issuer has not complied with the regs. Put those together and most platforms have the ability to filter out the types of companies and offerings they don't want to host.

Nothing in the rules prevents it although platforms could impose their own contractual requirements (eg, if you use our platform for TTW you have to use us for the actual offering).

BTW, the SEC were not actually expecting that TTW would happen on platforms! They thought TTW would be on social media or on issuers' own sites.