Intermediary - Launchopedia

Either a “Broker-Dealer” or a “Portal”, both allowed by the JOBS Act to consummate a securities-based crowdfunding transaction.¹

Institutional Investors

Investment Banks

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Definitioner

JOBS

Jumpstart our Business Startups Act

Securities

Includes all types of equity and debt instruments and rights in and to them.³

Portal

The second type of "Intermediary" authorized by the JOBS Act to facilitate securities-based crowdfunding, providing legally-mandated information to potential investors, and then managing transfer of the offered funds to the issuing companies in return for an equity ownership stake in or debt instrument from the issuing company.¹

Crowdfunding

“Crowdfunding” is the process of raising financial support for a venture via smaller amounts from many investors (“the crowd”), rather than the alternative pattern of larger amounts from a smaller number of supporters. Charities and philanthropies have traditionally employed both fundraising strategies (soliciting both the general populace, or crowd, as well as fewer wealthier donors), while businesses have usually taken the route involving fewer and larger supporters. Today’s internet has vastly increased the ability of fundraisers to communicate information, solicit and receive financial support from anyone on-line. Crowdfunding without the expectation of financial return, or with the promise of a specific good or service, are termed “donation-based” or “reward-based” crowdfunding, are in the nature of charitable solicitation or business marketing, and have never been illegal in the U.S. In contrast, soliciting funds in return for a ownership interest or expectation of repayment, are termed “equity-based” or “debt-based” crowdfunding (together grouped as “securities-based” crowdfunding), and have been until now governed (and effectively prevented) by federal and state securities law. One of the most significant parts (Title III) of the federal “Jumpstart Our Business Startups”, or JOBS Act of 2012 specifically enabled and legalized “security-based crowdfunding”, subject to a variety of regulations and restrictions.¹

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Broker-Dealer

In reference to “Crowdfunding”, one of the two types of "Intermediary" (“Portals” being the other) authorized by the “JOBS Act” to handle the sale of crowdfunded securities (i.e. equity or debt instruments) by an “issuing company”. More generally, a governmentally regulated component of the U.S. financial system, either a natural person or an organization trading securities on its own account or on behalf of customers. Broker-dealers are regulated by the federal Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA)(a “Self-Regulatory Organization”, or “SRO”), and sometimes the various states.¹

Related Terms Crowdfunding | JOBS Act Related Articles Crowdfunding - The Fastest Growing and Most Unusual Source of Startup Funding

INFOGRAPHICS

INFOGRAPHICS

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