Series 82: 1.1.3. Other Securities Transactions Exempt From Registration

1.1.3. Other Securities Transactions Exempt from Registration

Under Section 5 of the Securities Act of 1933, it is unlawful to offer or sell any security unless a registration statement is in effect. Section 4(a) of the Securities Act offers an exemption to this law for most transactions conducted in the ordinary course of business in the secondary market. This exemption typically does not apply to issuers or underwriters. It does, however, apply to dealers who have acted as underwriters if the transaction was part of an unsold allotment and occurred at least 40 days after the security was first offered to the public.

The crowdfunding exemption was created by Congress in 2012. It allows small companies to conduct online offerings to raise up to $5 million over a twelve-month period. The SEC set up a regulatory framework for crowdfunding in the form of Regulation Crowdfunding, also called Regulation CF. To be eligible, a company must be a domestic, non-reporting company that is not an investment company. The issuer of crowdfunding securities must file Form C with the SEC, which requires certain disclosures about itself and its officers and directors. There is no limit on the number of investors permitted in a cro