Oregon Intrastate Private Offering Exemption: Securities-Based Crowdfunding in Oregon, at Last?

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by Lee Lashway

Oregon is on the verge of joining a small number of other states in charting a path for its small businesses looking to raise a relatively small amount of capital through the sale of securities to a broader range of potential Oregon investors.

On November 14, 2014, the Oregon Division of Finance and Corporate Securities (Securities Section) issued proposed administrative rules for what it calls the “Oregon Intrastate Private Offering” (OIPO) exemption from registration. The rules were developed by a team of legal professionals, Oregon securities regulators, and small business advocates. In the words of the Securities Section, “This proposed rulemaking establishes an exemption for small amounts raised by Oregon small businesses through a “community public offering” or what is generally referred to as “crowdfunding.” The proposed rules place certain substantive restrictions on Oregon businesses relying on the exemption, such as individual investor and total offering caps. The rulemaking activity also requires disclosures be given to prospective investors and places restrictions on general advertising of the securities to the public.”

The federal Securities & Exchange Commission offered proposed rules for equity-based crowdfunding back in 2012 pursuant to the JOBS Act. However, despite significant public exposure and initial excitement in the entrepreneurial community, there has been little movement by the SEC toward finalizing the rules, and the industry is not optimistic that such will occur soon. Several states, now including Oregon, have taken the initiative to generate intrastate crowdfunding options for the benefit of local small business.

The OIPO proposed rules (OAR 441-035-0070 to 441-035-0230) may be found at the website of the Department of Consumer and Business Services:

//www.cbs.state.or.us/dfcs/rules_statutes/new_legislation/441-035proposed.pdf

The public comment period on the proposed rules will run through December 10, 2014, including a public hearing in Salem on December 3, 2014. The current plan is for final rules to become effective on January 1, 2015.

While the proposed rules will no doubt be met with enthusiasm, entrepreneurs and small business owners should understand that the OIPO rules as proposed and as likely to be adopted contain certain restrictions and implementation requirements with respect to issuer qualifications, limits on amounts to be raised, caps on individual investment amounts, notice, disclosure requirements, and post-sale reporting requirements, among other things. Subsequent articles will address those matters. Please contact me if you wish to discuss this further.

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Please contact Lee Lashway if you wish to discuss this issue further.