Regulation Crowdfunding or Reg C.F.is a securities exemption that allows online capital formation for smaller issuers. The exemption only requires a filing with the SEC, and therefore the business does not need to be “qualified” by the regulator before it can raise money online. Typically, an issuer uses Reg CF because they see it as a less costly way to raise funds legally. However, responsibilities continue after the financing round is completed.
As stated by Crowdfund Capital Advisors (CCA), issuers with calendar year financial reporting periods are required to file Form C-AR by April 30. If you do not do this, you will be breaking the rules and this may affect your ability to raise money in the future.
Additionally, the SEC may go after a non-compliant issuer, something they have not yet done, recognizing that many issuers are too small. Some may be bankrupt (and have not yet filed with the SEC). While the SEC is aware of this (minor) violation, the Commission has a bigger job to do. It is estimated that approximately 40% of issuers may be non-compliant because they have not filed Form C-AR.
While the SEC may be upset with issuers who forget or ignore filing the document, investors also lose out because they must request at least an annual update for a company they support.
