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KEMP: NEW FEDERAL CROWDFUNDING RULES TAKE EFFECT TODAY
ATLANTA — Georgia Secretary of State Brian Kemp alerts Georgia’s investment community that, as of today’s date, new Securities Exchange Commission regulations take effect to permit the purchase of securities through interstate crowdfunding. Kemp encourages investors to consult online resources issued by the Financial Industry Regulatory Authority (FINRA) which oversees the registration of crowdfunding portals. The North American Securities Administrators Association (NASAA) has also approved a release for public comment of a proposed model rule and uniform notice filing form for federal crowdfunding offerings.
“Now, American start-up companies can raise up to $1 million across state lines from the general public, subject to certain investment and income limits, which ushers the United States into a new era of crowdfunding,” stated Secretary Kemp. “I look forward to collaborating with our federal and state partners to benefit Georgia citizens and investors nationwide.”
In 2011, Georgia became the second state in the nation to allow intrastate crowdfunding when Secretary of State Brian Kemp enacted the Invest Georgia Exemption. Since its inception, 38 businesses of all shapes and sizes have applied for the exemption, including medical technology firms, real estate financing firms, manufacturers, and Normaltown Brewery and Cucina, which filed in mid-March 2016 as the program’s first “brewery-meets-restaurant”.
“The purpose of the Invest Georgia Exemption was to provide Georgia-based entrepreneurs with expanded access to capital from Georgia investors in order to develop new business ventures, expand existing operations, and create jobs in our state,” stated Secretary Kemp. “It is an attractive option for businesses looking for alternatives to traditional bank financing to fund both small-scale growth and assist businesses attempting multi-million dollar capital raises.”
To file for the Invest Georgia Exemption, the issuer has to be a for-profit Georgia entity, the issuer has to deposit the funds into a bank account in Georgia, and all investors must be Georgia citizens. In terms of paperwork, issuers have to fill out a simple, page-and-a-half notice filing.
Late last year, Secretary Kemp increased the Invest Georgia Exemption limit to allow Georgia companies to raise up to $5 million per offering from Georgia residents. Non-accredited investors can invest up to $10,000.
“We had some good feedback from companies that the $1 million cap was really limiting the type of projects that could use the exemption, so we raised the limit to $5 million to allow even more investment into Georgia companies,” said Kemp.
Previous filers have used the platform as a starting point, raising capital to fund future federal filings with the SEC. One of those filers is GROUNDFLOOR, a Georgia-based company which leveraged IGE to expand operations into other states after moving to Georgia on August 19, 2014 to take advantage of IGE and the state’s thriving real estate finance and development industries.
The company raised $1.7 million from Georgia residents under the exemption during the year-long pilot before qualifying under Regulation A+ on August 31, 2015. The money raised during this period was reinvested back into the local community through commercial real estate developers that used funds to rehabilitate residential properties. After the pilot concluded, the company expanded its model to eight new jurisdictions beyond Georgia, including California, Illinois, Massachusetts, Maryland, Virginia, Texas, Washington, and Washington, D.C. Since moving to Georgia, the company has grown from 5 to 19 full-time employees.
“Georgia continues to play a vital role in our company's expansion. We still expect to see a significant number of new borrowers and investors in Georgia,” said Brian Dally, co-founder and CEO of GROUNDFLOOR. “As we scale, we are bringing investment capital from around the nation back into Georgia. This is just one example of how Secretary Kemp's forward-thinking stance on capital formation benefits the state.”
Brian Kemp has been Secretary of State since January 2010. Among the office’s wide-ranging responsibilities, the Secretary of State is charged with conducting secure, accessible, and fair elections, the registration of corporations, and the regulation of securities, charities, and professional license holders. For more information about the office, visit our website at www.sos.ga.gov. Follow Secretary Kemp for agency news on Facebook, Twitter, and Instagram.
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