I blogged yesterday about the SEC's release of proposed rules to implement the JOBS Act crowdfunding exemption.

Both the JOBS Act and the proposed rules require that crowdfunding offerings be made through either registered securities brokers or registered funding portals. "Funding portal" is a new category of regulated entity created by the JOBS Act specifically for exempted crowdfunded offerings. The Act requires non-broker funding portals to belong to a national securities association subject to rules "written specifically for registered funding portals." (See section 3(h)(2) of the Exchange Act, as amended by the JOBS Act.) Because of that requirement, non-broker funding portals cannot engage in crowdfunding until those rules are in place.

Somewhat overlooked in the hoopla surrounding the SEC rules proposal was the release of proposed rules by the Financial Industry Regulatory Authority (FINRA) to regulate funding portals. The FINRA notice is here and the proposed rules are here.

I hope the SEC and FINRA are careful to coordinate final adoption of the crowdfunding rules and the FINRA rules. Funding portals cannot engage in crowdfunding until they have registered under the FINRA rules. If the crowdfunding rules go into effect before funding portals can register with FINRA, brokers will be able to begin operating crowdfunding platforms before funding portals, giving registered brokers a competitive advantage.