Advertising Rules and Restrictions 

NOTE: Nothing in this information is intended as Legal Advice.

Always seek the advice of a competent professional advisor or lawyer with any questions you may have regarding these matters. 

The SEC has stated in the adopting release that the permitted notices will be similar to “tombstone ads” under Securities Act Rule 134, except that the notices are intended to direct an investor to the intermediary’s platform or funding portal through which the offering is being conducted, such as through a link directing the investor to the platform.

Advertising Restrictions The final rules prohibit an issuer (or person acting on behalf of the issuer) from advertising the terms of the crowdfunding offering, except for limited notices (similar to “tombstone ads” permitted under Securities Act Rule 134) that direct investors to the intermediary’s platform. Information in advertising notices is limited to:

  • a statement that the issuer is conducting a crowdfunding offering, the name of the intermediary through which the offering is being conducted and a link to the intermediary’s platform;
  • the terms of the offering (the amount of securities offered, the nature of the securities, the price of the securities and the closing date of the offering period); and
  • limited factual information about the issuer: the name, address, phone number and website of the issuer; the email address of a representative of the issuer; and a brief description of the issuer’s business. The final rules do not impose limits on how the issuer distributes the advertising notices. For example, an issuer could place notices in newspapers or post notices on social media sites or the issuer’s own website.

In addition, issuers may communicate with investors about the terms of the offering through communication channels provided on the intermediary’s platform, provided an issuer identifies itself as the issuer in all communications.

The final rules also do not restrict an issuer’s ability to communicate other information that might occur in the ordinary course of its operations and that does not refer to the terms of the offering. 

While the final rules do not provide a safe harbor for regularly released factual business information so long as it does not refer to the terms of the offering, the adopting release notes that issuers may generally look to the provisions of Securities Act Rule 169 (which permits non-reporting issuers engaged in an initial public offering to continue to publish regularly released factual business information) for guidance in making this determination in the Regulation Crowdfunding context.

In addition, the final rules do not restrict an issuer’s ability to communicate other information that might occur in the ordinary course of its operations and that does not refer to the terms of the offering.

As stated in the Proposing Release, we believe that this is consistent with the statute because Section 4A(b)(2) restricts the advertising of the terms of the offer.

The Commission has interpreted the term “offer” broadly, however, and has explained that “the publication of information and publicity efforts, made in advance of a proposed financing which have the effect of conditioning the public mind or arousing public interest in the issuer or in its securities constitutes an offer…” In this regard, we also note that Securities Act Rule 169 permits non-Exchange Act reporting issuers engaged in an initial public offering to continue to publish, subject to certain exclusions and conditions, regularly released factual business information that is intended for use by persons other than in their capacity as investors. 

 Issuers should generally look to the provisions of Rule 169 for guidance in making this determination in the Regulation Crowdfunding context.

SEC Release 33-9974, p. 144 (2015) (footnotes omitted).

Rule 169 - Exemption from sections 2(a)(10) and 5(c) of the Act for certain communications of regularly released factual business information.

Preliminary Notes to Rule 169:

1. This section is not available for any communication that, although in technical compliance with this section, is part of a plan or scheme to evade the requirements of section 5 of the Act.

2. This section provides a non-exclusive safe harbor for factual business information released or disseminated as provided in this section. Attempted compliance with this section does not act as an exclusive election and the issuer also may claim the availability of any other applicable exemption or exclusion. Reliance on this section does not affect the availability of any other exemption or exclusion from the definition of prospectus in section 2(a)(10) or the requirements of section 5 of the Act.

3. The availability of this section for a release or dissemination of a communication that contains or incorporates factual business information will not be affected by another release or dissemination of a communication that contains all or a portion of the same factual business information that does not satisfy the conditions of this section.

(a) For purposes of sections 2(a)(10) and 5(c) of the Act, the regular release or

dissemination by or on behalf of an issuer of communications containing factual business information shall be deemed not to constitute an offer to sell or offer for sale of a security by an issuer which is the subject of an offering pursuant to a registration statement that the issuer proposes to file, or has filed, or that is effective, if the conditions of this section are satisfied.

(b) Definitions.

(1) Factual business information means some or all of the following information that is released or disseminated under the conditions in paragraph (d) of this section:

(i) Factual information about the issuer, its business or financial developments, or other aspects of its business; and

(ii) Advertisements of, or other information about, the issuer's products or services.

(2) For purposes of this section, the release or dissemination of a communication is by or on behalf of the issuer if the issuer or an agent or representative of the issuer, other than an offering participant who is an underwriter or dealer, authorizes or approves such release or dissemination before it is made.

(c) Exclusions. A communication containing information about the registered offering or released or disseminated as part of the offering activities in the registered offering is excluded from the exemption of this section.

(d) Conditions to exemption. The following conditions must be satisfied:

(1) The issuer has previously released or disseminated information of the type described in this section in the ordinary course of its business;

(2) The timing, manner, and form in which the information is released or disseminated is consistent in material respects with similar past releases or disseminations;

(3) The information is released or disseminated for intended use by persons, such as customers and suppliers, other than in their capacities as investors or potential investors in the issuer's securities, by the issuer's employees or agents who historically have provided such information; and

(4) The issuer is not an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or a business development company as defined in section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)).

§ 227.204 Advertising.

(a) An issuer may not, directly or indirectly, advertise the terms of an offering made in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), except for notices that meet the requirements of paragraph (b) of this section.

Instruction to paragraph (a). For purposes of this paragraph (a), issuer includes persons acting on behalf of the issuer.

(b) A notice may advertise any of the terms of an issuer's offering made in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) if it directs investors to the intermediary's platform and includes no more than the following information:

(1) A statement that the issuer is conducting an offering pursuant to section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), the name of the intermediary through which the offering is being conducted and a link directing the potential investor to the intermediary's platform;

(2) The terms of the offering; and

(3) Factual information about the legal identity and business location of the issuer, limited to the name of the issuer of the security, the address, phone number and Web site of the issuer, the email address of a representative of the issuer and a brief description of the business of the issuer.

(c) Notwithstanding the prohibition on advertising any of the terms of the offering, an issuer, and persons acting on behalf of the issuer, may communicate with investors and potential investors about the terms of the offering through communication channels provided by the intermediary on the intermediary's platform, provided that an issuer identifies itself as the issuer in all communications. Persons acting on behalf of the issuer must identify their affiliation with the issuer in all communications on the intermediary's platform.

Instruction to § 227.204. For purposes of this section, terms of the offering means the amount of securities offered, the nature of the securities, the price of the securities and the closing date of the offering period.

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