By Eric Siebert

News of successful crowdfunding efforts are present everywhere we look these days. From ideas of sock monkeys for cancer patients to ideas for dry composting toilets, crowdfunding has given everyday individuals who lack access to a large pot of financial resources the ability to make their otherwise lofty ideas become a reality. Crowdfunding has been described by the SEC as “an evolving method of raising capital that has been used outside of the securities arena to raise funds through the Internet for a variety of projects ranging from innovative product ideas to artistic endeavors like movies or music.” Although crowdfunding is not typically seen as a method for selling securities (due to the plethora of SEC regulations surrounding such sales), Title III of the JOBS Act creates an exemption to normal securities rules, allowing small businesses to more easily sell securities via crowdfunding. This exemption exists for small business as long as they comply with certain regulations.

Prior to the JOBS Act, the SEC restricted sales of securities to only accredited investors and a limited number of non-accredited investors. The majority of the population does not meet the high net worth or income standards to be qualified as an accredited investor, and thus cannot easily purchase a company’s securities. Under Section 5 of the Securities Act, businesses either had to comply with such requirements or face stiff penalties from the SEC.

However, pursuant to the JOBS Act, signed into law in April 2012, small U.S. business startups and entrepreneurs can sell securities to unaccredited investors (i.e., the general public) without having to deal with many burdensome SEC requirements. This crowdfunding exception is codified in Section 4(a)(6) of the Securities Act. This section allows a company (an “issuer” under the language of the Securities Act) to use the crowdfunding exception if, among other things, the company sells no more than $1 million in securities in any 12-month period and no more than a certain amount to any single investor. Continue reading →

By Brennen Johnson

Facebook’s recent attempts to prevent fraudulent activity on its platform have drawn both heat and praise. Last week, Facebook issued a statement regarding its continued commitment to combat the proliferation of spammers selling fake “likes.” Facebook explained that businesses can harm themselves through the use of such services because they “could end up doing less business on Facebook if the people they’re connected to aren’t real.”

While the company’s stated intent to cut down on this form of spam has garnered positive response from users, other practices aimed at protecting the authenticity of interactions have come under severe criticism. For instance, last week Facebook officially apologized to the outspoken protestors, Sister Roma and Lil Miss Hot Mess, for its practice of flagging and freezing profiles made under drag queen pseudonyms. Facebook’s product chief issued the apology, stating that hundreds of drag queens who were flagged for violating Facebook’s real-name policy will be able to use their stage names on Facebook. The same practice of requiring the “real names” of users has drawn similar criticism in the context of domestic violence victims and political dissidents living within authoritarian political regimes. Continue reading →