Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE operates a really cool website.  The publicly available page advertises “The best way to invest in startups. Insider access to pre-vetted startups. Low minimum investment sizes. Free membership. Join today.”  Another publicly available page states “Investments are made in venture funds set up for the startups, and therefore, the minimum check sizes are 10-20 times smaller than typical angel investments – $1K-$5K typically, vs. $25K-$100K.” It’s a little hard to tell though whether the site is operational or in test mode, but I wasn’t going to part with money to find out. Footnote 19 to the incoming SEC letter says the first multi-company fund has closed, though, and single fund companies are possible.

You would almost think it was illegal, but the SEC just issued a no action letter. A little further clicking indicates you have to certify you are an accredited investor before working your way into the site.

The no action letter doesn’t address general solicitation issues, but instead addresses whether the fundersclub is a broker dealer.  They don’t earn commissions on the sale of securities, but apparently do take a carried interest. The carried interest only pays out if a fund returns its capital contributions.  They also don’t propose to take a management fee.  The SEC apparently blesses the argument that only receives money if they are successful in creating value.  Or otherwise stated, traditional investment adviser compensation is not transaction based compensation earned by a broker-dealer.

Check frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.