Regulation Crowdfunding: A Practical Guide for Issuers Raising Capital from the Public

When Congress passed the JOBS Act in 2012, it created a new category of securities exemption designed to democratize access to early-stage investment. Regulation Crowdfunding, which became effective in May 2016 and was significantly expanded by the SEC in March 2021, allows companies to raise capital from the general public — including non-accredited investors — without registering the offering with the SEC. For issuers who want broad public participation in their raise, Reg CF is one of the most powerful tools in the exempt offering toolkit.

The Core Framework: What Reg CF Permits

Under Regulation Crowdfunding (codified at 17 C.F.R. Part 227), an issuer may raise up to $5 million in any 12-month period from an unlimited number of investors, including non-accredited investors. This is a significant departure from the Regulation D framework, which either restricts general solicitation (Rule 506(b)) or limits purchasers to accredited investors only (Rule 506(c)).

The offering must be conducted exclusively through a single SEC-registered funding portal or broker-dealer. Issuers cannot conduct a Reg CF offering directly — they must use an intermediary. Prominent platforms include Wefunder, Republic, StartEngine, and Mainvest, each of which is registered with the SEC and FINRA.

Investor Limits and Eligibility

While Reg CF permits non-accredited investors to participate, it imposes investment limits based on the investor's financial profile. For investors whose annual income or net worth is less than $124,000, the investment limit is the greater of $2,500 or 5% of the lesser of annual income or net worth. For investors whose annual income and net worth are both at least $124,000, the limit is 10% of the lesser of annual income or net worth, capped at $124,000 per 12-month period across all Reg CF offerings.

Accredited investors are not subject to these limits. Issuers are not responsible for verifying investor eligibility — the funding portal handles that obligation.

Disclosure Requirements: Form C

Before launching a Reg CF campaign, the issuer must file a Form C with the SEC through EDGAR. Form C is a substantial disclosure document that requires the issuer to provide:

Financial statements reviewed or audited by an independent accountant (the level of review required depends on the offering amount — offerings over $1.235 million require audited financials for first-time issuers); a description of the business, its officers, directors, and significant shareholders; the intended use of proceeds; the target offering amount and deadline; a description of the securities being offered and the rights they carry; and a discussion of risk factors material to the investment.

The Form C must be filed at least 21 days before the campaign goes live. Issuers must also provide ongoing updates to investors through the funding portal during the campaign period.

The Reg CF vs. Reg A+ vs. Rule 506(c) Decision

Issuers considering a public-facing capital raise often ask how Reg CF compares to its alternatives. The choice depends primarily on offering size, investor composition, and the issuer's tolerance for disclosure obligations.

Reg CF is best suited for issuers raising under $5 million who want broad public participation and are comfortable with the Form C disclosure process. The campaign format — hosted on a public platform — also serves a marketing function, generating visibility beyond the investor base.

Regulation A+ (Tier 2) allows issuers to raise up to $75 million in a 12-month period from the general public, but requires a more extensive offering circular reviewed by the SEC, ongoing annual and semi-annual reporting, and a longer pre-launch timeline. It is better suited for more mature companies with larger capital needs.

Rule 506(c) allows unlimited raise amounts but restricts purchasers to accredited investors only. It is the right choice when the issuer wants to advertise broadly but does not need or want non-accredited investor participation.

Post-Offering Obligations

Issuers who complete a Reg CF offering take on ongoing reporting obligations. An issuer must file an annual report on Form C-AR with the SEC within 120 days of the end of its fiscal year, disclosing updated financial statements and a current description of the business. This obligation continues until the issuer has fewer than 300 holders of record of the Reg CF securities, has filed at least one annual report, and either has total assets below $10 million or has completed a registered offering.

Securities sold under Reg CF are restricted for 12 months from the date of purchase, with limited exceptions (transfers to the issuer, accredited investors, family members, or in connection with a registered offering). Issuers should ensure that investors understand this restriction before the campaign closes.

Florida Considerations

Florida does not require a separate state notice filing for Reg CF offerings sold to Florida residents, unlike Regulation D offerings. However, issuers should confirm state preemption applies to their specific offering structure before launching. Florida-based issuers should also be aware that the Florida Office of Financial Regulation monitors crowdfunding activity and has enforcement authority over fraudulent or misleading offering materials directed at Florida investors.

Counsel for Reg CF Issuers

The Law Office of Carl G. Hawkins, PLLC advises issuers on Regulation Crowdfunding offerings, including Form C preparation, platform selection, disclosure strategy, and post-offering compliance. If you are considering a Reg CF campaign, contact the firm before selecting a platform or preparing your offering materials.