nd.gov - The Official Portal for North Dakota State Government
North Dakota: Legendary. Follow the trail of legends

Karen Tyler

ND Securities Department
600 East Boulevard Avenue
State Capitol, 5th Floor
Bismarck, ND 58505-0510
Phone: (701)-328-2910
Toll Free: (800)-297-5124
Fax: (701)-328-2946
Grafton Office
701 W 6th Street, #312
Grafton, ND 58237
Phone: 701-352-4592

Unregulated Third Party Service Providers

The implementation of the JOBS Act has created opportunities for unregulated third parties to provide ancillary services.  Whether a crowdfunding portal or an accredited investor aggregator, it is important to do your due diligence and to understand that use of an unregulated third party to provide such services does not change your obligations under federal and state securities laws.  Not only should a small business or other entrepreneur make sure they are dealing with a legitimate service provider, they should also make sure that the service being offered is in full compliance with all federal and state requirements.  Since the passage of the JOBS Act, new firms have joined existing firms that offer to sell lists of accredited investors for use in private placement offerings.  However, new rules recently adopted by the SEC include more stringent requirements replacing the old failsafe of reliance on an investor-completed questionnaire claiming accredited investor status.  If not done carefully and with federal requirements in mind, an entrepreneur will suffer the consequences, which could include the loss of any claimed exemption.  Use of crowdfunding portals, while subject to some regulation, also opens the door to scams.  Startup businesses, especially small local businesses, should be very careful to verify the legitimacy of a portal before engaging their services.  Investors are not alone in their potential to be scammed. Using a fraudulent portal means both the business and the investor stand to lose.