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

Requirements for Crowdfunding in West Virginia

To raise money through crowdfunding in West Virginia without violating securities laws, you must comply with the requirements set forth in WVCO 32-5-505. Here are the key requirements:

  • The offering must be made exclusively through an internet-based crowdfunding portal that is incorporated or organized under the laws of West Virginia and authorized to do business in West Virginia and registered with the commissioner.
  • The crowdfunding portal must contain a conspicuous disclaimer that reflects that access to securities offerings on the website is limited to West Virginia residents and offers and sales of the securities on the website are limited to persons that are West Virginia residents.
  • There must be an affirmative representation by a visitor to the crowdfunding portal that the visitor is a resident of West Virginia before the visitor can view securities-related offering materials on the crowdfunding portal website.
  • The crowdfunding portal must take reasonable steps to verify that all prospective purchasers are West Virginia residents.
  • At least ten days prior to an offering that qualifies for the exemption described in this article of the code, the crowdfunding portal shall give the commissioner access to its website and the required disclosure statement and summary of the offering.

Additionally, the disclosure statement must contain certain information, including a statement that there is no ready market for the sale of the securities acquired from this offering, that it may be difficult or impossible for an investor to sell or otherwise dispose of this investment, and that a purchaser may be required to hold and bear financial risks of this investment indefinitely. The crowdfunding portal must also conduct a reasonable investigation of the background of each issuer whose securities are offered on the crowdfunding portal’s website, and of each of the issuer’s executive officers, directors or managers or any individual or entity holding more than twenty percent of the outstanding equity of the issuer.

It is important to note that nothing in WVCO 32B-1-8 impairs, derogates or otherwise affects the authority or powers of the commissioner under the West Virginia Uniform Securities Act, or the application of any provision of chapter thirty-two of this code to any person or transaction subject to its provisions.

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Source(s):
Jurisdiction

West Virginia