Current through Register Vol. 48, No. 38, September 20, 2024
a) Definition.
"Internet portal" has the meaning ascribed in Section 2.36 of the Act.
Additionally, in this Section, when the context so indicates, the term
"internet portal" also means the entity maintaining the internet
portal.
b) Internet Portals.
Internet portals serving as platforms for crowdfunding activity as described in
Section 4.T of the Act must be registered with the Secretary of State. Brokers
registered under the Securities Exchange Act of 1934, or registered as funding
portals under the Securities Act of 1933, or registered as dealers with the
Secretary of State, are exempt from registering as internet portals under this
subsection (b)(1), but are subject to all other provisions of this Section.
1) Filing Requirements, Forms and Fees
A) Internet portals shall file Form IP with
the Secretary of State in accordance with the instructions on the form. The
registration shall be effective for one year.
B) The Form IP, including a renewal
application or amended form, shall be accompanied by all relevant documentation
required by the form and a filing fee of $300, as required by Section 18.1 of
the Act.
C) Annual renewal
applications shall be filed within 30 days prior to the expiration of the one
year registration period by filing Form IP.
D) Amendments or modifications to Form IP
shall be filed within 10 days after any information previously submitted on
Form IP becoming inaccurate.
E)
Withdrawals of registration shall be filed promptly on Form IP-W, in accordance
with the instructions on the form, upon ceasing to operate as a funding portal.
Withdrawal will be effective on the later of 30 days after receipt of Form IP-W
by the Secretary of State (after the internet portal is no longer operational),
or by a later date to which the internet portal consents, or by a later date
the Secretary of State, by order, may determine based on the public interest or
the protection of investors. If a Secretary of State proceeding is pending
pursuant to Section 11 of the Act when the application is filed or a proceeding
is instituted within 30 days after the application is filed, withdrawal becomes
effective at the time and upon the conditions the Secretary of State, by order,
determines, based on the public interest and protection of investors. The
Secretary of State may deny the withdrawal application if the internet portal's
registration is revoked or canceled by the Secretary of State.
2) The internet portal shall make
and preserve the records listed in this subsection (b)(2) for 5 years, the
first 2 years in an easily accessible place.
A) Records that shall be maintained are:
i) All records related to any investor who
purchases or attempts to purchase securities through the internet
portal;
ii) All records related to
issuers who offer and sell or attempt to offer and sell securities through the
internet portal and the control persons of those issuers;
iii) Records of all communications that occur
on or through the internet portal's platform;
iv) All records required to demonstrate
compliance with the Act and this Part;
v) All notices provided to issuers and
investors through the platform or otherwise;
vi) All written agreements (or copies of
those agreements) entered into by the internet portal relating to its business
as an internet portal;
vii)
Summaries of transactions effected through the internet portal;
viii) A log reflecting the progress of each
issuer offering, including total dollar amounts raised toward meeting the
target offering amount;
ix)
Organizational documents and such other documents as are relevant to the
business of the internet portal.
B) The records required pursuant to this
subsection (b)(2) may be prepared and maintained by a third party on behalf of
the internet portal.
3)
Communication Channels. An internet portal must provide on its platform
communication channels by which persons can communicate with one another and
with representatives of the issuer about offerings made available on the
internet portal's platform, provided:
A) The
internet portal does not participate in these communications other than to
establish guidelines for communication and remove abusive or potentially
fraudulent communications;
B) The
internet portal permits access to view the discussions made in the
communication channels to those investors and potential investors who have
opened an account with the internet portal and have been vetted as eligible
investors;
C) The internet portal
restricts posting of comments in the communication channels to those persons
who have opened an account with the internet portal on its platform;
and
D) The internet portal requires
that any person posting a comment in the communication channels clearly and
prominently disclose with each posting his or her full name and whether he or
she is a founder or an employee of an issuer engaging in promotional activities
on behalf of the issuer, or is otherwise compensated, whether in the past or
prospectively, to promote the issuer's offering.
4) Notice of Investment Commitment. An
internet portal must promptly, upon receipt of an investment commitment from an
investor, give or send to the investor a notification disclosing:
A) the dollar amount of the
commitment;
B) the price and amount
of the securities, if known;
C) the
name of the issuer; and
D) the date
and time by which the investor may cancel the investment commitment.
5) Confirmation of Transaction. An
internet portal must, at or before the completion of a transaction in a
security in reliance on Section 4.T of the Act, provide to each investor a
notification disclosing:
A) the date of the
transaction;
B) the type of
security the investor is purchasing;
C) the identity, price and number of
securities purchased by the investor;
D) the number of securities sold by the
issuer in the transaction and the prices at which the securities were
sold;
E) if a debt security, the
interest rate and the yield to maturity calculated from the price paid and the
maturity date;
F) if a callable
security, the first date the security can be called by the issuer;
and
G) the manner, including the
source and form, in which the internet portal is compensated in connection with
offerings and sales of securities.
c) Payments to Third Parties. An internet
portal may not compensate any person for providing the internet portal with the
personally identifiable information of any investor or potential investor in
securities offered or sold in reliance on Section 4.T of the Act.
d) The internet portal shall establish and
maintain reasonable measures to limit access to any information concerning an
offer or sale of the subject securities (other than the information of the type
permitted in connection with a general announcement by the issuer pursuant to
the Act and Section 130.493) to only residents of Illinois.
e) The internet portal shall have a
reasonable basis for believing that an issuer seeking to offer and sell
securities through its portal complies with the provisions of Section 4.T of
the Act and Section 130.493. In satisfying the requirement, the portal shall:
1) Conduct reasonable due diligence,
including a validation of the issuer's status and a review of the offering
documents and such other documentation as necessary to ensure compliance with
the Act and Section 130.493;
2)
Validate the existence of the required escrow agreement;
3) Complete the due diligence review for each
offering to be posted on the internet portal prior to allowing the offering to
be posted; and
4) Maintain and
preserve all material documents reviewed by the internet portal in connection
with its due diligence review.
f) The internet portal shall deny access to
its platform to an issuer if the portal has a reasonable basis for believing
that the issuer or the offering presents the potential for fraud or otherwise
raises investor protection concerns.
g) Any director, officer or partner of an
internet portal, or any person occupying a similar status or performing a
similar function, may not have a financial interest in an issuer that is
offering or selling securities in reliance on Section 4.T of the Act through
its portal, nor receive a financial interest in the issuer as compensation for
the services provided to the issuer in connection with the offer of sale of the
securities. An internet portal may not have a financial interest in an issue
that is offering or selling securities in reliance on Section 4.T of the Act
through the internet portant unless:
1) the
internet portal receives the financial interest from the issuer as compensation
for the services provided to, or for the benefit of, the issuer in connection
with the offer or sale of the securities being offered or sold in reliance on
Section 4.T of the Act through the internet portal's platform; and
2) the financial interest consists of
securities with the right of distribution or payment that is equal or junior to
the priority and rights of the investors in the offering.
h) An internet portal may waive its
compensation and fees in the case of a failed offering. Notwithstanding the
waiver, all provisions of the Act and this Part shall apply, except that the
waiver shall not be considered a success-based fee structure.
