Dollar Limit for Offering
Both Reg D, Rule 504 and Crowdfunding have a $1 million limit.
Advertising
The key thrust of the crowdfunding provisions is that the public may be solicited, some form of advertising can be used.
However, Reg D, Rule 504 already allowed advertising in certain circumstances. If the company registers in a state requiring delivery of an offering document before sale, and delivers an offering document before all sales, Rule 504 permits advertising. In fact, if you are registered in a state, the state will allow you to use a tombstone advertisement. If the state does not regulate advertising, you can do an hour infomercial and this is permitted by Reg D, Rule 504.
Further, 504 also has an accredited investor exemption. If you only go after accredited investors about half the states allow you to use a tombstone ad.
However, under Crowdfunding, you can only advertise the portal and not the deal. This is a significant handicap.
Audits
Reg D, Rule 504 does not require any audited financial statements. Some states will require them if you register.
Crowdfunding under the JOBS Act will require them for offerings over $500,000.
Limits on Investors
There are no limits on investors under Reg D, Rule 504. Individual states may have some such limits.
The JOBS Act rules say that if the investor has an income or net worth of less than $100,000, he can only invest $5,000. If income or net worth is over $100,000, then the investor can invest 10% of annual income or net worth, to a maximum of $100,000. The investor need not verify his income or net worth.
No specific information is required under Reg D, Rule 504 The states may have requirements.
The JOBS Act rules will require a list of disclosure items, but it is a light list.
Information
Sales
Crowdfunding portals are not allowed to recommend deals or give investment advice. Broker dealers are.
Blue Sky Laws
If you use Reg D, Rule 504, you still have to comply with state laws.
Crowdfunding will exempt you from the time and expense of state compliance.
Summary
Reg D, Rule 504 may allow more advertising than Crowdfunding. Under Rule 504, audits may not be required, depending on state rules.
Strategic use of Reg D, Rule 504 may be more advantageous than Crowdfunding.
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