These FAQs are meant to help answer questions that the Division
of Finance and Corporate Securities (the "Division") regularly receives about
Oregon's Intrastate Offering ("OIO") Exemption (crowdfunding). They are not
meant to be relied upon as legal advice (see "Can the Division
help me with my offering" section below for why).
Can my business use
the crowdfunding rules?
The exemption was designed to allow most Oregon small businesses to participate
in crowdfunded securities offerings. Your business may qualify to use Oregon's
crowdfunding exemption if all of the following apply:
- It is registered with the Oregon Secretary of State as
a domestic (i.e., Oregon) business and has 50 or fewer employees;
- Its principal place of business is in Oregon; and
- It only offers and sells stocks (equity in a business),
notes (secured debt), and debentures (unsecured debt).
The exemption is not available for any of the
- Blank check companies (i.e., development stage companies
with no specific business plan or purpose);
- Companies that are involved in petroleum exploration or
production, mining, or any other extractive industries; or
- Investment companies under Section 4 of the Investment
Company Act of 1940.
These types of companies are more speculative and carry
higher risks to investors and, therefore, require a higher level of review
What do I need to do to use the
Your business must meet the requirements above and those detailed in the
Oregon Administrative Rules. To use the exemption, you will need to take
the following steps:
- Meet in person with a business technical service
provider ("BTSP") to review your business plan.
- File a notice (click
here for the form) with the Division at least seven (7) days before
advertising, offering, or selling any security. The notice must include
a copy of the business's disclosures and advertising materials. It must
also include specific information about the business, its owners, and officers.
Administrative Rule 441-035-0110 for the specific information needed.
- Offer and sell the securities in accordance with the requirements
under Section 3(a)(11) of the Securities Act of 1933.
Can I still rely on this exemption
even if I am not able to meet all of the requirements of this exemption?
No. This exemption is available only if you meet all of its requirements.
Failure to comply with all of the rules could result in a finding by the Division
that you sold unregistered securities. Penalties could be as high as $20,000
per violation and result in you being unable to use the crowdfunding exemption
(or other exemptions to securities registration) in the future. You may also
be required to refund any sales made in reliance on the exemption.
The sale of unregistered securities can also result in sanctions
by other criminal, state, or federal agencies, or in an investor lawsuit.
Remember, in a court case, you have the burden
of proving that you met all of the exemption's requirements. We urge you to
keep detailed records related to transactions under these rules.
What do I need to disclose in the
You need to disclose all material information prior to the sale
of any security. In the most general sense, information is considered material
if it would likely alter the "total mix" of information available to a reasonable
investor. If it could impact a prospective investor's investment decision,
it is most likely material information" and should be disclosed.
The rules require that specific information be included in
the offering documents, including any factors that make an investment in your
business speculative or risky. While no one wants to think (and tell prospective
investors) about the downside of the investment decision, disclosing risk
factors can protect your business at the same time it protects investors.
Well-thought-out risk factors can protect you against later claims by investors
that they were not informed of the risks of the investment. (And, investors,
be sure you read and understand the risks of your investment). Well-thought-out
risk factors will avoid generalized statements; they will be specific to your
business. Sample risk factors could include:
You can find other examples of risk factors in Appendix
A to the NASAA Small Corporate Offering Manual
- There is no current market for the securities, and they
can only be transferred under specific circumstances, so an investor may
never be able to sell the securities.
- You have never managed a business before and so your management
and business decision-making are untested and may affect the business’s
profitability or even survival.
- You have managed a business before but it failed, and
this business may also fail.
- The business is highly dependent on the weather and a
drought or heatwave may devastate your crops, causing you to be unable to
pay back your obligations.
- The business is a sole proprietorship or dependent on
a few key employees. If something happens to the sole proprietor or the
employees, the business may not be able to continue its operations.
- You are offering a note, but you are not setting money
aside (a sinking fund) to pay back the note. Because you are not setting
aside money, you may not be able to pay the note and promised interest when
- Your business model is to manufacture and sell a niche
product. You have never seen the idea anywhere else, so you are not sure
how broad the niche is. There may not be a ready market for your product.
[Updated March 24, 2015]
How much capital can my business
Businesses can raise up to $250,000 in total funding under the crowdfunding
exemption. Businesses cannot raise more than $2,500 from any one individual.
Be careful if you will need to raise additional capital for your business
at the same time (or shortly before or after) conducting a crowdfunding offering.
For example, let's say your business needs $2.5 million in operating funds
and intends to raise 10 percent of that amount through a crowdfunding offering.
Offers and sales of the remaining 90 percent would likely be considered part
of the same offering, thus eliminating the ability to use the exemption.
Factors that will be considered when evaluating parallel
- Sales are part of a single plan of financing;
- Sales involve the issuance of the same type of security;
- Sales are made at or about the same time; and
- The sales were made for the same general purpose.
Generally, sales of securities made more than six months
before or after sales under the crowdfunding rules will not be considered
to be made under the crowdfunding rules.
While other exemptions may be available, each has its own
requirements and you will need to comply with all the requirements of whatever
path you choose. If you have questions about whether multiple paths of financing
may be considered a single offering, you should consult a lawyer.
[Updated March 24, 2015]
How does this exemption differ from
other ways of raising money?
There are a number of ways for small Oregon businesses to raise money through
the offer or sale of securities. Other methods do not have total offering
caps, individual investor limits, or restrictions on general advertising or
solicitation and might be more suitable for your business. You should carefully
consider how much funding you need for a specific product or expansion and
whether this exemption is the most suitable for your needs.
Also remember that if you are trying to raise money through
equity shares, you are selling ownership and control of your business. If
you are offering a note or a debenture, you are committing to pay back the
money with interest and under specific terms.
What is a business technical service
provider and what will they do?
BTSPs are organizations that have been specifically organized to provide assistance
to small businesses. The Division has automatically approved the small business
development centers and the economic development districts to act as BTSPs.
A listing of small business development centers can be found at http://www.bizcenter.org.
Oregon economic development districts can be found at http://www.oedd.org.
In addition, other nonprofit accelerators and incubators
may apply to be BTSPs. So far, the Division has only approved one of these
entities to act as a BTSP.
Because the BTSP's mission is to provide assistance to small
businesses, the Division anticipates that BTSPs will provide guidance regarding
business plans and other information they need to succeed. A BTSP is typically
not a lawyer, securities broker-dealer, investment adviser, or an expert in
securities law. It cannot give advice regarding the securities offering (unless
it is specifically licensed to do so).
Keep in mind the rules require any business wanting to use
the crowdfunding exemption to certify that a person responsible for the business
has met with a BTSP and that the BTSP has reviewed its business plan.
For more information on business technical service providers,
Can the Division help me with my
No. The Division of Finance and Corporate Securities can provide general interpretations
of the rules, but is prohibited from offering specific legal or investment
advice. Securities can be tricky; if you have questions, your best option
is to seek the advice of a lawyer.
You can send specific questions to the Division
about whether, and how, parts of the rule would apply to your business. We
can answer questions about whether a specific rule, or provisions that we
administer, applies to your specific business, but we cannot give legal advice
or help with preparing a crowdfunding offering.
[Updated March 24, 2015]
What is Section 3(a)(11) of the
federal Securities Act of 1933? (or What does it mean to be resident and doing
business in Oregon?)
Securities are regulated at the federal level as well as by the states, so
when selling securities you need to be aware of both state and federal laws.
Like Oregon securities law, federal securities law requires most investment
securities to be registered before they can be offered or sold. And, like
Oregon law, the federal securities law creates certain exemptions from registration
if the issuer follows all the terms of the exemption.
Section 3(a)(11) of the Securities Act of 1933 is an exemption
to the securities registration requirements under the federal securities law
for securities offered or sold only within a state to residents of that state
(i.e., an "intrastate" offering). This is why the crowdfunding exemption in
Oregon is only available to Oregon residents. The Securities and Exchange
Commission ("SEC") adopted Rule 147, which provides a non-exclusive safe harbor
under Section 3(a)(11). Under Rule 147, an Oregon business is a "resident
and doing business" in Oregon if all of the following apply:
- It is incorporated or organized under Oregon law;
- It derives at least 80 percent of its gross revenues during
its most recent fiscal year prior to the offering from the operation of
its business in Oregon;
- At least 80 percent of the business's assets at the end
of its most recent semi-annual period prior to the offering are located
- The issuer intends to use at least 80 percent of the net
proceeds of the offering in connection with the operation of its business
in Oregon; and
- The business's principal office is located in Oregon.
Oregon's Intrastate Offering Exemption was designed to promote
compliance with the federal Securities Act, and specifically Section 3(a)(11).
The Oregon rules require that the offer and sale of crowdfunding securities
be conducted in accordance with the requirements under Section 3(a)(11). Because
of the federal requirements, strict compliance with the state rules is important.
[Updated March 24, 2015]
Can I engage in general advertising
or solicitation of my securities?
It depends. Under SEC interpretations of Rule 147, the issuer of a security
may engage in general advertising or solicitation if it is made only to residents
of that particular state.
In order to ensure that businesses comply with that requirement,
Oregon's crowdfunding rules require that before engaging in any general advertising
or solicitation, an issuer (or a third-party platform advertising on behalf
of an issuer) obtain an "affirmative declaration" from an
interested investor that the investor is an Oregon resident. Such
"affirmative declaration" can be accomplished by requiring that
an interested person provide his or her ZIP code or check a box on a webpage
stating "I am an Oregon resident" before viewing any advertising
Advertising under the rules is limited to no more than the
- The name and contact information for the issuer.
- A brief description of the general type of business of
- Whether the securities being offered are stock, notes,
debentures, or a combination.
- The total offering amount.
- A brief description of how the issuer will use the funds.
- The duration of the crowdfunding offering and the funding
- The issuer's logo.
- A link to the issuer's website or third-party platform
on which the securities will be offered or sold and the required disclosures
Keep in mind that the definition of "offer" under the federal
and Oregon securities law is broad. Offers can include statements meant to
"condition the public mind" or "arouse public interest in" a securities offering.
In other words, promoting investment in your business while you have an active
crowdfunding offering needs to be done carefully. It can subject you to the
advertising rules, even if you don't think you are expressly "offering" your
securities. Be careful about what public statements you make during the period
you are offering and selling securities in reliance on this exemption. See
also the "Can I use the Internet" section below for more information.
What does "residency" mean? Can
I offer my securities to a person who is temporarily living in a different
It depends. A person is generally considered a resident of Oregon if the place
they live most of the time is in Oregon. Because the federal Securities and
Exchange Commission (SEC) drafted Rule 147, we defer to the interpretations
the SEC provides. In 2009, the SEC addressed Rule 147 and residency this way:
"Question: May an issuer rely on Rule 147 to offer
or sell securities within a single state to a person whose principal residence
is in such state but who resides temporarily out of the state?
For the purposes of the crowdfunding exemption, a person
doesn't need to have been born in Oregon (or even the U.S.) or spend 100 percent
of their time in Oregon in order to be residing in Oregon.
[Updated March 24, 2015]
Can I use the Internet to advertise,
offer, and sell my securities?
Yes, securities may be advertised on an issuer's website or through
a third-party platform's website. The circumstances under which an
issuer or third party may advertise through the Internet, however, are specific.
Because federal securities law also governs the registration and sale of securities,
issuers must make sure to sell their securities in accordance with the requirements
of both the Oregon crowdfunding rules and Section 3(a) (11)
of the federal Securities Act. We urge you to read the rules carefully before
advertising, offering, or selling securities over the Internet.
Businesses that want to offer securities through their website
must remember that the offer and sale can only be made to Oregon residents
and that a prospective investor must make an "affirmative declaration"
before viewing any advertising or offering materials. This means that businesses
cannot advertise or offer securities on webpages that can be viewed by everyone
around the world. Businesses must use a separate webpage on their website
that requires interested people to affirmatively declare that they are an
Oregon resident before being able to view the page with the material that
advertises or offers the security. A business can include a link to the Oregon-only
webpage on its general website for interested Oregonians to follow to "learn
more about supporting this business" or "to learn more about investing
in this business."
Because the definition of "offer" is broad, businesses
are encouraged to include only factual information about themselves on the
generally accessible sections of their websites. Under state and federal law,
"forward looking statements," such as talking about future development,
product lines, or long-range plans, could be considered an offer to sell securities
under Section (3)(a)(11) and should be made only to Oregonians if you are
seeking to use the crowdfunding exemption.
Businesses can also post their advertising and offering materials on a website
that is hosted by a third-party platform provider. Such third-party platforms
may be used to post disclosures and advertisements, but they may not act as
investment advisors or broker-dealers (unless they are specifically licensed
to do so). This means that they cannot endorse specific businesses or securities
offerings on their platforms. The third-party platform provider must also
ensure that prospective investors have provided some sort of affirmative declaration
that they are Oregon residents before viewing any advertising or offering
materials. Third-party platforms may charge issuers a nominal fee for hosting
While an individual business may sell its securities on an
"Oregon only" portion of its website, a third-party platform cannot
sell securities unless it is a licensed broker-dealer. Even licensed broker-dealers
are not allowed to collect commission on sales of crowdfunding offerings.
If a website collects financial or personal information about
prospective investors, it must take steps to ensure that the information is
kept secure and private.
Can I talk to the press (radio, TV,
newspapers, bloggers, etc.) about my offering?
In the Internet age, most media coverage is not limited to a single state
--for instance, Portland, Oregon and Vancouver, Washington are considered
a single media market; most radio programs and newspaper articles can be accessed
from anywhere in the world through a website. This can cause problems for
businesses using an intrastate exemption from securities registration.
Because Section 3(a)(11) requires that offers and sales of
securities only be made to residents of the state where the business has its
principle office, communications that are meant to induce, excite, or entice
a person's interest in the security must be limited to people residing in
Oregon. Talking about your business's past or even current products and services
is usually not enough to be considered an "offer." However, "forward looking
statements," such as talking about future development, product lines, or long-range
plans, would likely be considered an offer to sell securities. When you talk
about raising money for your business - including how much you want to raise,
why you want to raise it, what you plan to do with the money, or how much
you have already raised - that begins to look like an offer of a security
and must be limited to residents of Oregon.
Remember, it is up to you to prove that you complied with
an exemption. If you don't have an exemption, you must register your securities.
[Updated March 24, 2015]
How can I receive payment from investors
for securities I am offering?
There are a number of options for selling crowdfunded securities over the
Internet (you can also sell your securities in person). An issuer can use
its own website to sell its own securities under the exemption or it can use
a third-party licensed money transmitter to accept payment. While a BTSP cannot
handle investor funds (unless it is a licensed money transmitter), a BTSP
can redirect investor funds through a licensed money transmitter.
The rules require that issuers of crowdfunded securities
have a reasonable basis for believing that a purchaser is an Oregon resident.
If you use the Internet to sell your securities, you will need to be able
to accommodate investors uploading or otherwise sending you documentation
demonstrating that they are Oregon residents before a sale takes place.
Remember, if you accept payment or collect personal information
over the Internet, you have a duty to take steps to make sure the information
is kept private and secure.