FINRA has recently fined two registered funding portals, Wefunder and StartEngine, a combined $1.75 million for failing to comply with securities laws and regulations designed to protect crowdfunding investors.
Wefunder raised approximately $20 million more than they were permitted under FINRA’s current crowdfunding regulations. They also failed to promptly direct the transmission of funds to investors and issuers, improperly sent emails to investors recommending and soliciting investments despite this being in violation of a rule that prohibits such solicitations; included misleading communications on its funding portal website; and, failed to maintain a reasonable supervisory system to supervise its business.
StartEngine included issuer communications on its funding portal website that it knew or had reason to know were false or misleading, posted its own inaccurate counts of the number of investors in the offerings on its portal, and failed to reasonably supervise potentially misleading issuer-prepared content.
Jon-Jorge Aras, Partner and Chair of Securities Litigation at Warren Law Group states, “With the growth of fundraising and marketing efforts over the internet, companies like Wefunder and StartEngine are unwittingly exposing themselves to the world of securities regulation and the steep consequences for failing to comply with the rules. The time spent upfront to ensure regulatory compliance can save significant cost and avoid the devastating effects of an SEC or FINRA enforcement action.”
If you have received a notice from FINRA that you are in violation of crowdfunding regulations, you should seek experienced legal counsel to mitigate your case. Contact the attorneys at Warren Law Group at (866) 954-7687 or email firstname.lastname@example.org to schedule your consultation.