In the last couple of years , while waiting for Title III to be eventually released by the SEC, several US states adopted intrastate crowdfunding laws, which allow companies to raise capital through local securities crowdfunding portals. Among them there is Michigan, whose securities crowdfunding exemption allows resident issuers to offer securities only to local investors, like it also happens in other states.
The Michigan Invests Locally Exemption (MILE), was signed by Michigan governor last December. The exemption permits an issuer to sell securities to non-accredited investors and utilize general solicitation if specific requirements are satisfied. In particular, the requirements include the following:
While MILE currently does not differ significantly from other states’ crowdfunding exemptions, a law, which has been recently proposed, may change securities crowdfunding in Michigan, putting it in the forefront of the intrastate crowdfunding movement. In fact, Michigan is currently evaluating whether to create Michigan investment markets, that is secondary markets for the resale of securities purchased under MILE. In particular, the transactions taking place in these secondary markets would be handled by broker-dealers without registering under Federal regulations, but only with Michigan state. All the transactions in secondary markets would need to take place between Michigan resident and the related fees cannot exceed 5% of the transaction value.
Providing an exit to investments, the creation of secondary markets may indeed foster Michigan intrastate crowdfunding, pushing more investors to give it a try. The law is still in a proposal phase, however if it will ever get signed Michigan would be the first US state to have a secondary market for securities crowdfunding. This innovation would of course bring in new challenges and issues to deal with, for instance how logistically Michigan investment markets would work. Also it is not to underestimate the following question: is a single state like Michigan able to generate a volume of intrastate securities large enough to justify the presence of a secondary market?
ReferencesFranks, W.H. (2014). The state of crowdfunding in Michigan. Grand Rapid Business Journal.
Ortel, N.M. (2014). Michigan Intrastate Crowdfunding and More. Foster Swift.
Image credit: Jason Carpenter http://bit.ly/1uvHo8k
- Both the issuer and the investors shall be resident in Michigan.
- The total amount raised by the issuer cannot exceed $1 million (or $2 million if the issuer has audited financial statements).
- Non accredited investors cannot invest more than $10,000 in a single offer.
- The issuer has to provide investors with a disclosure statement reporting information about the business, the offer and its risks.
While MILE currently does not differ significantly from other states’ crowdfunding exemptions, a law, which has been recently proposed, may change securities crowdfunding in Michigan, putting it in the forefront of the intrastate crowdfunding movement. In fact, Michigan is currently evaluating whether to create Michigan investment markets, that is secondary markets for the resale of securities purchased under MILE. In particular, the transactions taking place in these secondary markets would be handled by broker-dealers without registering under Federal regulations, but only with Michigan state. All the transactions in secondary markets would need to take place between Michigan resident and the related fees cannot exceed 5% of the transaction value.
Providing an exit to investments, the creation of secondary markets may indeed foster Michigan intrastate crowdfunding, pushing more investors to give it a try. The law is still in a proposal phase, however if it will ever get signed Michigan would be the first US state to have a secondary market for securities crowdfunding. This innovation would of course bring in new challenges and issues to deal with, for instance how logistically Michigan investment markets would work. Also it is not to underestimate the following question: is a single state like Michigan able to generate a volume of intrastate securities large enough to justify the presence of a secondary market?
ReferencesFranks, W.H. (2014). The state of crowdfunding in Michigan. Grand Rapid Business Journal.
Ortel, N.M. (2014). Michigan Intrastate Crowdfunding and More. Foster Swift.
Image credit: Jason Carpenter http://bit.ly/1uvHo8k
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
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