In Part 1 we looked at what you can say about your equity crowdfunding offering before and after your campaign begins (after filing the required Form C).
So, you patiently waited and you didn’t tell anybody about your plans until you filed. NOW you can go shout about it from the rooftops, right? Not so fast, the Securities and Exchange Commission (“SEC”) still wants you to keep things tight-lipped.
There is, however, one small exception. You can communicate the terms of the offering on a “tombstone ad”.
Silent as the Grave? Not Quite.
A tombstone ad is just as it sounds: a written ad containing the bare facts about the potential investment. Such ads may only include a statement that the company is conducting an equity crowdfunding offering, the name of the portal through which such opportunity is taking place, the terms of the investment and very basic information about the identity and location of the company. This is a standalone ad: In other words, it can’t be coupled with any other information about the business or its services. This means that a company should be very careful about the medium it chooses to communicate a tombstone ad. A blast e-mail may be fine, but putting it on your website is likely a bad idea.
The Fine Line Between Compliance and a Violation
The harsh restrictions on what you can include in tombstone ads make them somewhat unconventional when conducting a traditional securities offering. The SEC will consider any communication that even hints at or implies the terms of the investment to be a (likely noncompliant) tombstone ad. Below are some no-nos to avoid so you don’t unintentionally communicate the terms of your offering:
As you can see, equity crowdfunding is a potentially powerful tool raising money for your business. You may want to consult with an experienced business attorney to help you navigate the SEC’s strict regulations, guide you through the equity crowdfunding process and avoid problems due to noncompliance.
The experienced attorneys at Romano Law are ready to help. Contact us at 212-865-9848 or complete this form to speak to a member of our team!