Disclosure requirements
Your right to know: Companies or projects raising on Republic must follow varying disclosure requirements under each regulation: Reg CF, Reg A+, and Reg D.
Below is more information on your rights as an investor.
Regulation Crowdfunding
Regulation CF enables eligible companies to offer and sell securities through crowdfunding.
Companies fundraising on Republic under Reg CF must disclose a limited amount of
information to you, including:
- general information about the company,
- its officers and directors,
- a description of the business,
- the planned use for the money raised from the offering, often called the use of proceeds,
- the funding goal,
- the deadline for the offering, related-party transactions,
- risks specific to the company or its business, and
- financial information about the company.
You should use this information to determine whether a particular investment is appropriate for you. The type of financial information disclosed as well as verification of finances varies based on whether the issuer has raised via crowdfunding in the past, as well as the amount being raised.
- $124,000 or less – financial statements and certain specific line items from income tax returns are required, both of which are certified by the principal executive officer of the company. In certain situations, issuers raising up to $250,000 may rely on self-certification.
- $124,000.01 to $618,000 – financial statements are reviewed by an independent public accountant and the accountant’s review report is provided as well as certification by the principal executive officer of the company. A review is some level of scrutiny of the financials by a CPA.
- $618,000.01 to $5 million – if first time crowdfunding, then financial statements reviewed by an independent public accountant and the accountant’s review report if available are disclosed for offerings up to $1.235M: otherwise financial statements audited by an independent public accountant and the accountant’s audit report must be prepared and disclosed. An audit provides a higher level of scrutiny by the accountant than a review as well as some verification by the accountant.
Regulation A+
Per the SEC, Regulation A allows companies to offer and sell securities to the public, but with more limited disclosure requirements than what is required for publicly reporting companies. Companies fundraising on Republic under Reg A must provide you with an offering circular, which contains important information about the offering including:
- Risks of the investment
- Use of proceeds
- Any shares being offered by existing shareholders
- The company’s business
- Management
- Performance
- Plans and financial statements
- Any additional materials that you receive in addition to the offering circular.
Regulation A allows companies to raise money under two different tiers that have different ongoing reporting obligations. Tier 1 allows a company to raise up to $20 million in any 12-month period and does not have any ongoing reporting obligations except an exit report that details the completion of an offering. Tier 2 allows a company or project to raise up to $75 million in any 12-month period, and has ongoing reporting obligations. Companies or projects under Tier 2 must have financial statements audited by an independent accountant. Read more on the SEC website here.
Regulation D and S
There are no specific disclosure requirements under Reg D and S per federal law, however, Republic ecosystem will not allow an issuer to conduct an offering without making disclosures substantially similar to those required under Regulation CF.
NOTE: Most offerings have a discussion forum where you should ask any questions you have and review those asked by other investors. These channels can be useful both before and after making an investment.
Once an offering has closed, the issuer may provide updates on the results of its operations and financial statements through its website on an annual basis. These updates are likely to be less regular and robust than those provided by public companies to their shareholders. There are numerous ways for an issuer to legally discontinue providing these updates, so you should not rely on these updates being provided indefinitely. Republic does not make the issuer’s post-closing disclosure available to you through its website.
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