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The Financial Industry Regulatory Authority is known by the initials FINRA. A non-profit American corporation, FINRA is not a part of the government. In an effort to safeguard investors and maintain the integrity of these capital markets, FINRA’s main goal is to supervise exchange markets and brokerage firms. FINRA is regulated by the SEC.

An angel investor is an individual who provides capital to startup companies in exchange for ownership equity or convertible debt. Angel investors are typically high-net-worth individuals who are looking for higher returns on their investment than can be obtained from more traditional investments. They often have experience in the industry in which the startup is focused, and may provide mentoring or other support in addition to capital. Angel investing is typically considered higher risk than traditional investing, but also has the potential for higher returns.

At its broadest definition, crowdfunding refers to the method of raising funds for a specific project or organization by raising smaller amounts of money from a very large number of people. Crowdfunding campaigns are typically done via the internet using various digital marketing tactics.

Want to know more about the four primary types of crowdfunding?

The success of the raising can be significantly impacted by the offering’s structure and conditions. To make sure you choose an offering structure and offering conditions that will appeal to the investors you’ll be targeting, it is strongly advised that you confer with your marketing partner (as well as legal, of course) as you design your offering.

Some points to remember are:

1. Develop time-based rewards

Consider including time-based investment deadlines in your proposal wherever you can. Investors that invest early and before the dates you specify will benefit in some way.
2. Establish financial incentives

Include strategies to encourage investors to make larger investments wherever it is practical.
3. Choose the appropriate minimum investment.

Selecting the appropriate minimum is essential for any kind of capital raise. You want to locate that ideal range that is neither too high nor too low.
4. Avoid adding pointless obstacles.

Avoid putting needless obstacles in your way so that you can’t successfully implement a raise. I’ve seen it many times before where issuers took advice and raced with it only to come to regret it as the raise developed.
One significant illustration of this that I came across was with a first-time Reg A issuer who had a self-imposed investment requirement specified in their Form 1-A, thus requiring that their funds remain in escrow until they hit a threshold of $750K into their offering. Because the issuer was unable to reinvest any of the early monies raised into the offering to keep it going, the offering was effectively cancelled. In order to continue, they ultimately had to file revisions with the SEC, but doing so required the issuer to expend important time and resources.

For the most part, non-accredited investors are NOT allowed to invest in Regulation D offerings, including both 506(b) and 506(c).

But there is one exception for 506(b) offerings where the SEC allows up to a maximum of 35 non-accredited investors to participate. Issuers are still not allowed to advertise the investment offering to these non-accredited investors and they must be existing relationships of the issuer.

The SEC rule on this states the following for 506(b) offerings:

• Securities may not be sold to more than 35 non-accredited investors.
• All non-accredited investors must meet the legal standard of having sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment.

And when these non-accredited investors are participating in the offering, the following rules will apply:

• The issuer must give any non-accredited investors disclosure documents that generally contain the same type of information as provided in Regulation A offerings.
• They must also give any non-accredited investors financial statement information specified in Rule 506.
• And lastly, the issuer should be available to answer questions from prospective purchasers who are non-accredited investors.

An accredited investor is someone who meets the income or net worth requirements that the Securities and Exchange Commission has defined for an accredited investor:

Financial Criteria for Accredited Investors

1.  Net Worth – Have an individual or joint net worth over $1 million (excluding their primary residence)

2. Income – Have income in excess of the following in each of the prior two tax years:

• Over $200,000 per year individually
• Or over $300,000 per year jointly (with spouse or partner)

Professional Criteria for Accredited Investors

3. Investment professionals who hold one of the following:

• Series 7 – General Securities Representative License
• Series 65 – Investment Adviser Representative License
• Series 82 – Private Securities Offerings Representative License

4. Executive officers, directors or general partners of the company selling the securities

5. Any “family office” or “family client” that qualifies as an accredited investor

6. Specifically for investments in a private fund, anyone considered a “knowledgeable employee” of the fund

Anyone who does NOT meet these criteria would be considered a non-accredited investor.

The National Association of Securities Dealers Automated Quotations, or simply NASDAQ, is a stock exchange with its headquarters in New York City. It was established in 1971 and, after the New York Stock Exchange (NYSE), is the second-largest stock exchange in the US by market capitalisation. It is renowned for both its electronic trading platform and the listing of tech giants like Tesla, Facebook, and Amazon.

The fact that the NASDAQ is a dealer market and the NYSE is an auction market, which implies that in the NASDAQ market, buyers and sellers negotiate trades directly with market makers rather than through an auction, as in the NYSE, is one of the key differences between the two exchanges.

Many of the top technological and growth businesses in the world, such as Apple, Microsoft, Intel, and Cisco Systems, are based on the NASDAQ. It also offers trading in a variety of other products, such as bonds, options, and exchange-traded funds (ETFs). The NASDAQ Nordic and NASDAQ Baltic exchanges are also run by NASDAQ, allowing for the trading of securities throughout Europe.

Other markets run by NASDAQ include the Nasdaq Global Select Market, Nasdaq Global Market, and Nasdaq Capital Market. These markets are divisions of the NASDAQ Stock Market that cater to various business types by having various listing and financial requirements.

Employee equity compensation in the form of restricted stock units (RSUs) is given by employers to their staff. They stand for the right to receive shares of the employer’s stock at a later time, frequently after completing specific requirements, such continuing employment or performance benchmarks. RSUs are often granted outright to the employee, with no purchase necessary, in contrast to stock options, which grant the holder the right to purchase shares at a certain price. They are referred to as “restricted” because they are unable to be transferred or sold before the limitations have been abolished. The RSU is converted into a specific number of shares of stock upon vesting, making the employee a shareholder in the business.

A grant agreement or award agreement is often where the parameters of RSUs, such as the amount of units granted, the vesting schedule, and the transferability restrictions, are laid out. The vesting schedule may be based on performance-related milestones, such as hitting specific revenue or earnings goals, or it may be based on time, such as vesting over a number of years. Depending on the conditions of the grant agreement, the employee may be able to sell or transfer the underlying shares once the units have vested and become his or her own property.

When RSUs vest and the employee owns the underlying shares, they are regarded as a type of taxable income. Taxes on the fair market value of the shares at the time of vesting will be due from the employee. Taxes may also need to be withheld by the firm at the time of vesting.

Depending on the accounting standards applied, there are various ways to account for Restricted Stock Units in the company’s financial statement. However, in general, the business will record an expense on the grant date for the fair value of the RSUs and modify it over the vesting period to reflect the award’s service condition.

By providing employees with a stake in the company’s performance, restricted stock units allow businesses to balance the interests of employees and shareholders. They can also be a valuable form of pay for employees, giving them a direct financial stake in the success of the business and the chance for share values to rise.

A private equity fund is an investment vehicle in which an investment advisor pools funds from multiple investors to make investments on behalf of the fund.

Often, the pooling of funds allows for the negotiation of a better price than would otherwise be possible with multiple smaller investments.

Private equity funds are similar to both mutual funds and hedge funds.

Securities that an investor purchases through a private sale by the issuing business are referred to as “restricted securities” and are often subject to some sort of resale restrictions. Restricted security types consist of:

Securities (where relevant, as not all debt is a security)

Common stock

Preferred stock Debt

Options on Stock

Stock Options

Pink sheets refer to stock listings that are traded over-the-counter (OTC) as opposed to on a major stock exchange such as the NYSE or NASDAQ. Oftentimes, companies that trade over-the-counter are able to meet the stricter set of requirements that would need to be fulfilled by a company to list on a major US stock exchange.

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