56 OPPORTUNITY ZONE MAGAZINE | VOLUME 2 • ISSUE 1
For sponsors who are struggling to raise equity or are in a time crunch to do so , crowdfunding enables easier access to investor capital .
may only be required by the issuer or regulation to contribute a minimum of , for example , $ 25,000 or less . For sponsors who are struggling to raise equity or are in a time crunch to do so , crowdfunding enables easier access to investor capital . Yet , crowdfunding can be stressful in that it requires additional marketing , different management strategies , potentially further scrutiny from investors during the 10-year holding period , potentially more complicated accounting mechanisms , and additional state blue skies filing costs and burdens .
Some qualified opportunity fund sponsors may be accustomed to raising funds from a smaller network of sources through a fund in a Rule 506 ( b ) offering . Rule 506 ( b ) is a safe harbor under Regulation D of the Securities Act that provides a way for companies to raise money without registering with the SEC . Essentially this means that sponsors in a Rule 506 ( b ) offering cannot advertise to the general public . Solicitation is , however , permitted under a Rule 506 ( c ) offering . Rule 506 ( c ) permits issuers to broadly solicit and generally advertise an offering , provided that , except as noted above , purchasers in the offering are accredited investors , the fund sponsor takes reasonable steps to verify purchasers ' accredited investor status , and certain other conditions in Regulation D are satisfied . Sponsors who raise equity through a crowdfunding platform would therefore need to do so pursuant to a Rule 506 ( c ) offering .
CROWDFUNDING UNDER THE INVESTMENT COMPANY ACT
Another potential complication with crowdfunding arises under the Investment Company Act of 1940 , which regulates the organization of companies that engage primarily in investing , reinvesting , trading in securities , and whose own securities are offered to the investing public . Qualified opportunity funds frequently qualify for an exclusion from regulation under the Investment Company Act , among other potentially applicable exemptions , under Section 3 ( c )( 1 ), because they will typically have fewer than 100 beneficial owners , as calculated in accordance with the
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