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Warning - Equity Investments are Risky
Risk Warning

BlazeFund does not provide investment advice or make investment recommendations; solicit purchases, sales, or offers to buy the securities offered or displayed by the companies on its website or portal; compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on our website/portal. We also do not hold, manage, possess, or otherwise handle investor funds or securities; nor do our directors and officers have a financial interest in any offering.

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Warning - Equity Investments are Risky

Guidelines

BACKGROUND

These are the current guidelines relating to cowdfunding intermediary provisions in Title III of the JOBS Act as passed by Congress in April 2012. Until the SEC issues guidelines for unaccredited investors, our portal will be available for use by accredited investors only.

Crowdfunding issuers

Title III of the JOBS Act amends Section 4 of the Securities Act to create a new exemption for offerings of “crowdfunded” securities. Specifically, the JOBS Act amends Section 4 of the Securities Act to exempt issuers from the requirements of Section 5 of that Act when they offer and sell up to $1 million in securities, provided that individual investments do not exceed certain thresholds and the issuer satisfies other conditions in the JOBS Act, some of which will require rulemaking by the SEC.

One of these conditions is that issuers use the services of an intermediary that is either a broker registered with the SEC or a “funding portal” registered with the SEC.

Funding portals

Title III of the JOBS Act adds new Section 3(h) to the Exchange Act which requires the SEC to exempt, conditionally or unconditionally, an intermediary operating a funding portal from the requirement to register with the SEC as a broker. The intermediary, though, would need to register with the SEC as a funding portal and would be subject to the SEC’s examination, enforcement, and rulemaking authority. The funding portal also must become a member of a national securities association that is registered under Section 15A of the Exchange Act.

A funding portal is defined as a crowdfunding intermediary that does not: (i) offer investment advice or recommendations; (ii) solicit purchases, sales, or offers to buy securities offered or displayed on its website or portal; (iii) compensate employees, agents, or others persons for such solicitation or based on the sale of securities displayed or referenced on its website or portal; (iv) hold, manage, possess, or otherwise handle investor funds or securities; or (v) engage in such other activities as the SEC, by rule, determines appropriate.

The JOBS Act directs the SEC to adopt rules to implement Title III within 270 days of enactment of the Act. The President signed the JOBS Act into law on April 5, 2012.

ADDITIONAL INFORMATION

A crowdfunding intermediary is required to register with the SEC either as a broker or as a funding portal once the SEC issues the final set of guidelines in January 2013. BlazeFund, Inc. will register with the SEC as a funding portal before it begins operations.

There are limitations on what a funding portal can do which protects investors. Among other things, the JOBS Act imposes several restrictions on the activities of a registered funding portal. A funding portal is not permitted to:

  • provide investment advice or make recommendations;
  • solicit purchases, sales, or offers to buy the securities offered or displayed on its website or portal;
  • compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its website or portal;
  • hold, manage, possess, or otherwise handle investor funds or securities; or
  • engage in any other activities the SEC determines to prohibit in its crowdfunding rulemaking.

In addition, each funding portal and each crowdfunding broker is prohibited from:

  • compensating promoters, finders, or lead generators for providing the intermediary with the personal identifying information of any potential investor; or
  • allowing its directors, officers, or partners (or any person occupying a similar status or performing a similar function) to have a financial interest in any issuer using the services of the intermediary.

The JOBS Act requires these intermediaries to, among other things:

  • provide disclosures that the SEC determines appropriate by rule, including regarding the risks of the transaction and investor education materials
  • ensure that each investor: (1) reviews investor education materials; (2) positively affirms that the investor understands that the investor is risking the loss of the entire investment, and that the investor could bear such a loss; and (3) answers questions that demonstrate that the investor understands the level of risk generally applicable to investments in startups, emerging businesses, and small issuers and the risk of illiquidity;
  • take steps to protect the privacy of information collected from investors;
  • take such measures to reduce the risk of fraud with respect to such transactions, as established by the SEC, by rule, including obtaining a background and securities enforcement regulatory history check on each officer, director, and person holding more than 20 percent of the outstanding equity of every issuer whose securities are offered by such person;
  • make available to investors and the SEC, at least 21 days before any sale, any disclosures provided by the issuer;
  • ensure that all offering proceeds are only provided to the issuer when the aggregate capital raised from all investors is equal to or greater than a target offering amount, and allow all investors to cancel their commitments to invest;
  • make efforts to ensure that no investor in a 12-month period has purchased crowdfunded securities that, in the aggregate, from all issuers, exceed the investment limits set forth in section Title III of the JOBS Act; and
  • any other requirements that the SEC determines are appropriate.
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