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Why FINRA Fines Wefunder $1.4 Million for Crowdfunding? It’s because of Rule Violations.
FINRA has taken to digital media to announced today that it has fined two FINRA-registered funding portals a combined $1.75 million for failing to comply with securities laws and rules designed to protect crowdfunding investors.
According to the statement made available for daily4mative it reads:-
“Funding portals perform an important gatekeeping role for securities that are offered to investors under Regulation CF, the crowdfunding exemption from securities registration,” said Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement. “Today’s actions highlight FINRA’s vigilance over this developing area of securities regulation and our unrelenting focus on investor protection.”
How did FINRA find out about the violations
FINRA regularly examines and conducts ongoing surveillance of funding portal members to determine compliance with FINRA’s funding portal rules and SEC requirements.
The Wefunder and StartEngine matters both originated from FINRA’s examination program.
In the Wefunder matter, FINRA found that from 2016 through 2021, across 39 separate offerings, Wefunder raised approximately $20 million more than permitted under crowdfunding raise limits.
It did this by diverting the excess funds raised in the crowdfunding offering to a subsequent offering conducted under a different exemption from registration. FINRA found that by doing so, Wefunder exceeded the scope of its permitted activities as a funding portal.
