There is a federal exemption for Demo Days but it is useless because it doesn't preempt state law. To legally do a demo day where the public is invited, even if the event fits under the Demo Day exemption, it will still be illegal to do public solicitation under state law (unless the offering is being done under Reg CF or Rule 506(c) in which case there is federal preemption).

It means that the instrument/contract that is being assessed will be considered a "security" under applicable laws.  This means you will need to either register the offering of that security (with the SEC and applicable state regulators) or find an exemption for those registration requirements.  

Yes you can do a Reg D offering concurrently with a Reg CF offering. However, you'd want to make the Reg D a 506(c), which permits general solicitation, because while concurrent offerings under Reg CF  and 506(b) are theoretically possible, it can get very complicated, especially because in the CF you are going to have to disclose the existence of the Reg D offering (and vice versa).   

The estimated accounting and legal costs for an ongoing Regulation Crowdfunding (Reg CF) offering of $5 million can vary depending on several factors, such as the complexity of the offering, the location of the startup, and the specific legal and accounting services obtained. However, I can provide you with a general breakdown of the potential costs involved. Please note that these figures are estimates and can vary significantly:

1 - Legal Costs:

- Startup Formation: When establishing a Reg CF entity, there are legal costs associated with forming the startup, such as incorporating the company, drafting corporate documents, and other regulatory compliance requirements. These costs can range from $2,000 to $10,000 or more, depending on the complexity and location of the startup.

- Offering Documentation: Drafting the offering documents, including the Form C, subscription agreement, and other required disclosures, can cost between $5,000 and $20,000, depending on the complexity of the offering and the legal services obtained.

- Compliance and Regulatory Filings: Ongoing compliance with SEC regulations and filing requirements may incur additional legal costs. These costs can vary based on the complexity and frequency of filings required by the Reg CF entity, but it's advisable to budget a few thousand dollars annually.

2 - Accounting Costs:

- Financial Statement Preparation: Reg CF requires the preparation and disclosure of financial statements. The cost of preparing these statements can range from $3,000 to $10,000, depending on the complexity and the level of detail required.

- Ongoing Accounting and Bookkeeping: Maintaining accurate financial records, bookkeeping, and financial reporting over the four-year term of the Reg CF offering will require accounting services. The cost of these services can range from a few thousand dollars to tens of thousands of dollars per year, depending on the complexity of the business and the frequency of reporting required.

It's important to note that these estimates are general and can vary significantly based on the specific circumstances of the startup, the location, the legal and accounting service providers chosen, and other factors. It's advisable to consult with professionals in the legal and accounting fields to get more accurate estimates based on your specific situation.

Completely different process for the two sorts of offering.

In a Reg CF offering, the Form C is filed with the SEC and the moment it shows up on the EDGAR system, the issuer can start accepting investment commitments on the intermediary's site. The SEC does not review or sign off in any way. That doesn't mean they (and other regulators) aren't looking, though!

In a Reg A offering, the SEC must review and "qualify" the offering before it goes live. (We don't use the term "approve"; the SEC never approves or blesses offerings.) If it's a Tier 1 Reg A offering, the states that the offer will be made into also have to sign off.

In both cases, you can "test the waters" before filing or qualification, but any materials you use to test the waters need to be filed with the SEC.

The Howey test is a legal test used to determine whether an investment contract exists and, therefore, whether certain securities laws apply. The test is named after a U.S. Supreme Court case called SEC v. W.J. Howey Co., in which the Court set out a four-part test to determine whether an investment contract exists.

The four elements of the Howey test are:

- There is an investment of money.
- The investment is made in a common enterprise.
- There is an expectation of profits from the investment.
- The profits are to be derived from the efforts of others.

If all four elements are present, the investment is considered to be an investment contract and is subject to securities regulation. The Howey test is used by the U.S. Securities and Exchange Commission (SEC) to determine whether a particular investment is a security and whether it must be registered with the SEC. The test is also used by the courts to determine whether a particular investment is a security and whether it is subject to securities laws.

*Written by OpenAI's ChatGPT - Not Legal Advice* 

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* 

@Brian Belley, @Jenny Kassan and @Sara Hanks, I wonder if you have thoughts about where to incorporate a benefit corp.

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