Crowdfunding is a way to raise capital for a business by accepting investments of small dollar amounts from a larger number of people, typically via the internet. In other words, a "crowd" of investors helps to fund the business. Beginning June 1, 2014, a Wisconsin business may raise up to $1 million from state investors through crowdfunding portals, referred to in 2013 Wisconsin Act 52, as "internet site operators." The amount that can be raised increases to $2 million if the issuer has had an audit in its most recent fiscal year and has provided the audit to prospective investors and the Division of Securities.
Any single purchaser may invest a maximum of $10,000 in a single crowdfunding offering unless the purchaser is an accredited investor or a certified investor. "Certified investor" is defined as someone who has an individual net worth (or joint net worth with the individual's spouse) of at least $750,000 or had an individual income in excess of $100,000 in each of the two most recent years (joint income with spouse in excess of $150,000).
2017 Wisconsin Act 213 updated certain provisions of the crowdfunding exemption as of April 5, 2018:
- The issuer must have a principal place of business and be doing business in Wisconsin but no longer needs to be organized under Wisconsin law.
- The exemption incorporates Rule 147A adopted under the Securities Act of 1933 (17 CFR 230.147A) in place of Rule 147.
- The escrow agent must be authorized to do business in the state but no longer needs to be chartered under Wisconsin law.
- Internet site operators may receive commissions.
- Issuers no longer need to file their quarterly reports to investors with the division but shall provide them if requested by the division.
- A new solicitation of interest exemption was added as Wis. Stat. s. 551.202(26m).
- File a notice with the division at least 10 days before commencing an offering – the notice must include a disclosure document, an escrow agreement with a Wisconsin-chartered financial institution, a financial audit (if applicable - upload with the disclosure document), and a $50 filing fee.
File a DFI 551.202(26) Issuer Exemption Notice Filing online.
- Comply with the "intrastate" exemption under federal law, meaning that all sales must be to Wisconsin investors.
- Make the offer available through one or more internet sites that are registered with the division.
- Provide a copy of the disclosure document to each prospective investor, hold all payments in escrow and not access them until the target offering amount has been raised.
- Provide quarterly reports to investors.
- Not be subject to the "bad actor" disqualification under federal securities law.
Before offering securities for sale under the crowdfunding exemption, a solicitation of interest or "testing the waters" may be conducted in compliance with Wis. Stat. s. 551.202(26m)
. Prior to the initial solicitation of interest, the offeror must file with the division a completed Solicitation of Interest Form DOSSOI
and related materials. No sales of securities may be made until 20 calendar days after the last delivery of a solicitation of interest document, scripted media broadcast, Internet post, or other media publication.
Internet Site Operators
Under Wis. Stat. s. 551.205
, an internet site operator used for purposes of the exemption under Wis. Stat. s. 551.202(26)
must be organized under Wisconsin law and authorized to do business in Wisconsin, and registered with the division. The fee for registration is $100.
The internet site operator must maintain records of the offers and sales of securities through the internet site and may not offer investment advice or solicit purchases.
The internet site operator must also file quarterly reports with the division to disclose the progress of the offerings being conducted under Wis. Stat. s. 551.202(26)
. The quarterly reports are due within 10 business days of each calendar quarter ending on March 31, June 30, September 30, and December 31. They can be submitted via email to DFISecurities@dfi.wisconsin.gov
. The "progress of the offering" includes a) the total amount of securities offered; b) the total sales of securities made, as of the date of the quarterly report, to investors who are not accredited or certified; and c) if applicable, the termination date of the offering.
2013 Wisconsin Act 52 also created an exemption for certain intrastate offerings that are not conducted through the internet and that meet the requirements of Wis. Stat. s. 551.202(27)
. Before the 101st offer of the security, the issuer must provide a notice to the division with the filing fee of $50. General solicitation or general advertising is permitted in connection with the offer to sell or sale of the securities if in compliance with the Order issued by the Administrator on November 21, 2017. If submitting a financial audit with the notice filing, email the audit to DFISecurities@dfi.wisconsin.gov
Phone: (608) 266-2139