[ by Howard Haykin ] FINRA approached the podium and, in a voice no louder than a whisper, said the word "crowdfunding."  The announcement didn't grab everyone's attention, but that's okay, because FINRA is only working with a rule proposal draft that will be reworded and refined based on comments received from the industry. Another thing is that no one's quite sure how the market will respond to this unique financing technique, and the Street remains split on whether it can work at all.  Yet, FINRA is tasked with the job of writing rules to govern the process.  It's using The Jumpstart Our Business Startups Act (JOBS Act) as a guide. The new law is aimed at increasing American job creation and economic growth - and it contains key provisions relating to securities offered or sold through "crowdfunding." Under the new law, intermediaries performing crowdfunding on behalf of issuers must register with the SEC - as a "funding portal" or broker, and must register with an applicable SRO. FINRA is soliciting public comment on the appropriate scope of FINRA rules that should apply to member firms engaging in crowdfunding activities, either as funding portals or as brokers. FINRA Contacts. Direct your questions to: Gary Goldsholle, VP, Assoc. G.C., Office of General Counsel (OGC) - (202) 728-8104; or Adam Arkel, Assoc. G.C., OGC - (202) 728-6961. Dear Readers: The remaining text was taken from FINRA's Regulatory Notice and has not yet been edited.  Please return later, or click on the link below to read the notice firsthand.  Thanks. To help FINRA process and review comments more efficiently, persons should use only one method to comment on the proposal.  Important Notes: The only comments that FINRA will consider are those submitted pursuant to the methods described above.  All comments received in response to this Notice will be made available to the public on the FINRA website.  Generally, FINRA will post comments as they are received.  Before becoming effective, a proposed rule change must be authorized for filing with the SEC by the FINRA Board of Governors, and then must be filed with the SEC pursuant to Section 19(b) of the Securities Exchange Act of 1934 (SEA). Background & Discussion. The crowdfunding provisions of the JOBS Act provide an exemption from registration under the Securities Act of 1933 (Securities Act) for securities offered by issuers in amounts of up to $1 million over a 12-month period provided that the amount raised from any single investor adheres to strict limits (ranging from $2,000 to $100,000) based on the investor’s annual income or net worth.  The crowdfunding exemption establishes specific eligibility and sales practice standards for issuers and intermediaries that engage in crowdfunding. Intermediaries that seek to engage in crowdfunding must be registered as a broker or a funding portal, a newly created entity. The regulatory scheme established by Congress expressly contemplates a role for an organization such as FINRA by mandating that each registered funding portal be a member of an applicable SRO.7 However, Congress limited a national securities association’s examination and enforcement authority over such registered funding portals to its rules “written specifically for registered funding portals.” Registered Funding Portal Rules. While the scope of any FINRA rules written specifically for registered funding portals will be influenced by, and should not be duplicative of, any crowdfunding rules adopted by the SEC, we have had conversations with SEC staff suggesting that FINRA should consider adopting its own crowdfunding rules. To assist in developing its crowdfunding rules, FINRA solicits comment on the specific rules that FINRA should adopt for registered funding portals that become FINRA members. In writing rules specifically for registered funding portals, FINRA would seek to ensure that the capital-raising objectives of the JOBS Act are advanced in a manner consistent with investor protection. Commenters are encouraged to identify the types of requirements that should apply to registered funding portals, taking into account the relatively limited scope of activities by a registered funding portal permitted under the JOBS Act.  Comments are particularly requested about possible rules concerning supervision, advertising, anti-money laundering, fraud and manipulation, and just and equitable principles of trade. Application of FINRA Rules to Crowdfunding Activities by Broker-Dealers FINRA also solicits comment on the application of existing FINRA rules to crowdfunding activities of broker-dealers. Unlike the rules applicable to registered funding portals, the JOBS Act does not limit the FINRA rules applicable to registered broker-dealers engaging in crowdfunding activities.  Nevertheless, FINRA invites comments from broker-dealers regarding the application of existing FINRA rules to broker-dealers’ crowdfunding activities and whether such rules should be relaxed to address a broker-dealer’s crowdfunding activities, taking into account, among other things, the extent to which a  broker-dealer may be able to isolate its crowdfunding business, or otherwise places limitations on its activities akin to those for registered funding portals.  FINRA requests information from brokerdealers that may engage in crowdfunding concerning the organizational structure through which this activity would occur within the firm (e.g., through the broker-dealer entity or a separately identified department).  FINRA also requests comment on whether engaging in crowdfunding might present special conflicts or concerns for a broker-dealer, such as might arise if a registered representative were to recommend that a customer visit the firm’s crowdfunding site. For further details, go to: [FINRA RegNote 12-34, July 2012].