A company and its officers and directors are liable to the purchasers of a crowdfunding offering if it makes an untrue statement of a material fact or omits to state a material fact required to be stated if necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. Officers and directors are able to avoid liability for false statements if they can show that they did not, and with the exercise of reasonable care could not, have known of the misleading statement or omission. This is the traditional standard of liability for any offering. However, the position of the SEC is that the funding portal has the same position of liability with respect to the offering document.

The SEC’s position is that if an intermediary reviews the issuer’s offering documents, and has other procedures in place, it might be able to escape liability for the issuer’s misleading statements. However, this is a serious issue which has to be addressed by portals.

There are no restrictions on the amount of compensation which funding portals may charge, however, they are not allowed to pay a finder’s fee to any other person except to a registered broker-dealer. It appears, according to the Form Cs being currently filed with the SEC, that the standard  compensation is about 3% to 4% of the amount raised.

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