Finra seeks info from crowd funders

Looking to fill in the blanks on funding and ownership

Jan 11, 2013 @ 3:51 pm

By Dan Jamieson

crowd-funding
+ Zoom

Finra wants to get a handle on the new crowd-funding portals that are likely to proliferate once rules are in place allowing the sites to sell securities.

The Financial Industry Regulatory Authority Inc. on Thursday asked portals to provide information voluntarily about their ownership, funding sources, management and regulatory history of managers, business relationships, types of securities they plan to offer, compensation, plans to use mandatory arbitration agreements with investors, and how they will supervise their portals.

“The information received will help Finra develop rules specific to crowd-funding portals,” Finra said in a statement.

In response to a request last summer, though, Finra has already received comments on how it might regulate crowd-funding portals.

The self-regulator probably wants to see how sophisticated and well-capitalized the portals are, as well as “conduct early background checks on principals and investors in these companies,” said Freeman White, chief executive of Launcht.com, a service provider for portals, and an executive committee member of the Crowdfund Intermediary Regulatory Advocates, an advocacy group.

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