Social Media Do’s And Don’ts for Texas Crowdfunding Issuers
Social media is a huge marketing tool for any business and for several reasons. Number one: it’s free! Number two: you can reach a wide audience with one post. And number three: it’s free! Social media was a blessing to all businesses when it started gaining steam about 10 years ago. Today, it is one of the most useful marketing tools in the world because most buyer segments are on social media. If you post, they will read.
However, that is a main concern of the Texas State Securities Board. All Texas intrastate crowdfunding business has to occur within Texas state borders. Creating social media blasts that will be seen all over Twitter and Facebook make no sense because your followers in Illinois, Oregon and Virginia can’t see or pledge money to your offering. They have to be certified Texas residents just to join a Texas intrastate crowdfunding portal.
The TSSB stepped in front of this issue and created regulations for it in their Information for Issuers Using the Intrastate Crowdfunding Exemption rules. After you click on the link, scroll all the way to the bottom and you will find the section titled Social Media. It is very important that all issuers understand these rules because the TSSB has said multiple times it is going to run Texas intrastate crowdfunding by the book. In today’s blog we are going to go through this section and explain some of the sections we think may be confusing to our audience. Texas intrastate crowdfunding is brand new to everyone, so it would be wise for any potential issuer to understand what he or she can or can’t do on social media.
Important Social Media Rules for Texas Equity Crowdfunding Issuers
The opening sentence of the Rule 139.25 reads: Outside of the communications channel on the general dealer or TCP’s Internet website, Rule 139.25 allows the issuer to distribute a limited notice. The “communications channel on the general dealer or TCP’s Internet website” is referring to an internal newsfeed on a crowdfunding portal. At truCrowd, we have a Twitter-like feed where you can interact with investors and write posts about your offering. It is basically a mini social media newsfeed just for truCrowd users. You will find it perfect for communicating with other users but you will also to supplement internal marketing with traditional social media marketing.
The limited notice mentioned here refers to the type of content you can share and who you can share it with. As for the type of content, the TSSB is limiting you to:
– a statement that the issuer is conducting an offering
– the name of the registered general dealer or TCP through which the offering is being conducted
– a link directing potential investors to the dealer or TCP’s Internet website
You must also include a disclaimer that your offering and all securities appearing on the portal you are linking to are limited to Texas residents.
SEC Rule 147 and Texas Intrastate Crowdfunding Rule 139.25
The next section of Rule 139.25 explains the necessary compliance with SEC Rule 147 in order to claim the Rule 139.25 exemption. SEC Rule 147 states: We believe….that issuers could implement technological measures to limit communications that are offers only to those persons whose Internet Protocol, or IP, address originates from a particular state or territory and prevent any offers to be made to persons whose IP address originates in other states or territories. What this means is that companies who want to advertise their offering on social media must find a way to only send the message to IP addresses in Texas. IP addresses are just like your home address – each device connected to a computer network is given a set of numbers to identify it. By limiting your post to IP addresses in Texas, it would be impossible for any device outside of Texas state lines to receive the information.
The last segment of Rule 147 should be familiar by now: Offers should include disclaimers and restrictive legends making it clear that the offering is limited to residents of the relevant state under applicable law. Issuers must comply with all other conditions of Rule 147, including that sales may only be made to residents of the same state as the issuer. Basically, the SEC and TSSB want you to make it abundantly clear that your offering is limited to Texas residents and only Texas residents can pledge money to you.
At the end of Rule 139.25, the TSSB recommends you to consult with an attorney regarding your compliance with SEC Rule 147. Full compliance is 100% mandatory, so even if you think you have your posts in compliance, it would be wise to have a legal professional give you the “Ok” before you send them off. This is definitely a classic case of “better safe than sorry” because “sorry” here means you will be disqualified from Texas intrastate crowdfunding and won’t be allowed to raise the capital you need. Do yourself and the future of your company a favor – follow Rule 139.25 and SEC Rule 147 by the book.
Thank you for reading and please leave your questions and comments below!