Well it’s official. At long last my proposed Illinois intrastate crowdfunding exemption has been formally drafted as a proposed bill. It may be without a sponsor at the moment but one step at a time….
For those that are interested in reading the full proposed bill, it is attached below. PLEASE NOTE, my proposed bill is NOT 50 pages long. The drafters in Springfield insist on including each statute, in full, including the portions which were not amended which more than doubled the size of the proposed bill.
If you would prefer the cliffs note’s version, here are some of the main points:
- Adds new definition of “accredited investor” (see new 815 ILCS 5/2.34).
- Amends the transaction exemption provided by 815 ILCS 5/4(H) to allow for offers, sales and/or issuances of securities to any “accredited investor” and for the general promotion of the same.
- Provides new definition of “qualified escrowee,” which includes title insurance companies (see new 815 ILCS 5/2.35).
- Provides new Intrastate Exemption (see 815 ILCS 5/4(T)). Highlights include:
- $20,000,000 funding cap unless the Issuer: (a) has been in business for at least the twelve (12) consecutive months immediately prior to the proposed offering; and (b) has made available to prospective purchasers audited financial statements certified by one or more senior officers of Issuer. The funding cap amounts will be increased every 5 years to reflect changes in the Consumer Price Index (CPI). – See subsection (2)
- Max amount received by an issuer from any particular purchaser (other than accredited or experienced investors) limited to the greater of $10,000 or ten percent (10%) of the purchaser’s expected annual income in the year of sale. Amount will be increased every 5 years to reflect changes in the Consumer Price Index (CPI). – See subsection (3)
- The Secretary of State shall create, and make available on its website, a registration form to be completed and filed by (or on behalf of) an issuer 10 days prior to the earlier of the first sale of securities made under this exemption or the use of any general solicitation (other than a “general announcement”) with respect thereto. – See subsection (7)
- Requires use of a “qualified escrowee” for the collection of funds from potential purchasers. – See subsection (8)
- Requires the issuer (directly or indirectly) to obtain evidence that each purchaser is a resident of Illinois and, if applicable, is an experienced or accredited investor. Identifies certain reliable forms of acceptable evidence for same. – See subsection (12)
- Requires the issuer (and to the extent an internet portal is used, the internet portal) to establish commercially reasonable measures for limiting access to information to residents of Illinois (permits relying on IP Address verification). Allows for “general announcement” of offering by issuer. – See subsection (13)
- Requires delivery (or electronic access to) internally prepared quarterly financial statements/business reporting of issuer. – See subsection (p)
- Provides new definition of “qualified internet portal.” Establishes new provision related to offerings made through a “qualified internet portal” (see 815 ILCS 5/8d). Highlights include:
- The portal shall be owned by an entity organized, or otherwise qualified to do business, in Illinois and in good standing. – See subsection (a)
- Allows for “general announcement” of offering by internet portal. – See subsection (b)
- The Secretary of State shall create, and make available on its website, an application for qualification form to be completed and filed by a portal 30 days prior to any proposed offering. The intent is that this application form will NOT be onerous and provide only basic information regarding the entity and the portal URL. – See subsection (e)(4)(A)
- Provides for an exemption from registration as a “dealer” or “investment adviser” under the Act for an internet portal that meets certain requirements. Specifies certain actions which do not, by themselves, constitute offering investment advice or recommendations. – See subsection (g)
- Provides for the following new filing fees:
- A $100 filing fee for any offering made under the new Intrastate Exemption (see 815 ILCS 5/4(T)). The intent was to make the fee equal to the filing fee required for a ULOE offering pursuant to Section 4.D of the Act;
- A $300 filing fee for any qualification, or renewal of a qualification, of an internet portal. The intent was to make the fee equal to the filing fee required for the registration of a dealer under the Act.
I have researched each of the current enacted and proposed intrastate exemption and this bill is my attempt at drafting an intrastate crowdfunding bill that balances the needs of issuers and investors. That being said, I would love feedback on the bill so please feel free to reach out to me. Oh, and if you happen to know anyone in the Illinois representatives looking to sponsor a crowdfunding bill, please send them my way….
For a full copy of the bill proposed bill click below: