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Can I use crowdfunding to raise money without violating securities laws in Rhode Island? What are the requirements?

Crowdfunding in Rhode Island

Crowdfunding is a way to raise money for a project or venture by soliciting small contributions from a large number of people, typically via the internet. In Rhode Island, crowdfunding is regulated by the Rhode Island Uniform Securities Act (RIUSA) [2.1].

Requirements for Crowdfunding

Under the RUISA, crowdfunding is considered a securities offering and is subject to registration or exemption requirements. The Rhode Island Department of Business Regulation (DBR) has adopted a crowdfunding exemption that allows issuers to raise up to $1 million in a 12-month period from Rhode Island residents [2.1].

To qualify for the exemption, the issuer must meet the following requirements [2.1]:

  • The issuer must be organized under Rhode Island law and have its principal place of business in Rhode Island.
  • The issuer must not have more than $5 million in assets.
  • The issuer must not have raised more than $5 million in the aggregate from crowdfunding offerings in the past 12 months.
  • The offering must be conducted through a registered crowdfunding portal.
  • The offering must be made only to Rhode Island residents.
  • The maximum amount that can be invested by a Rhode Island resident is $5,000, unless the investor is an accredited investor.
  • The issuer must provide certain disclosures to investors, including financial statements and a description of the risks associated with the investment.

Conclusion

In summary, crowdfunding is regulated by the Rhode Island Uniform Securities Act, and issuers must comply with registration or exemption requirements. The Rhode Island Department of Business Regulation has adopted a crowdfunding exemption that allows issuers to raise up to $1 million in a 12-month period from Rhode Island residents, subject to certain requirements. To qualify for the exemption, the issuer must be organized under Rhode Island law, have its principal place of business in Rhode Island, and meet other requirements. The offering must be conducted through a registered crowdfunding portal, and the maximum amount that can be invested by a Rhode Island resident is $5,000, unless the investor is an accredited investor.

Source(s):
Jurisdiction

Rhode Island