Regulation Crowdfunding requires that an escrow account be opened for every offering in an effort to protect investors. In fact, Registered Funding Portals must name a qualified escrow agent for the offerings during the initial SEC and FINRA registration process. Beyond the regulatory requirement, there are many benefits to using an escrow account when raising capital. An escrow account allows investors to submit funds that are securely held while the offering is in the process of raising capital. This allows the completion of any open due diligence items before investments are finalized, thereby increasing investor conversion rates and ensuring that all transactions are processed prior to finishing the raise. If the offering is unsuccessful or an investor wishes to back out during the fundraising process, the escrow provider promptly returns funds to investors.
As a custodial broker-dealer, North Capital can act as an approved escrow agent for Registered Funding Portals. Our escrow services are fully integrated with our technology and payment processing services to streamline the entire investor on-boarding process.
For our escrow services, North Capital performs a high level due diligence review prior to undertaking any new agreement. Many funding portals pass through the cost of this due diligence review to the issuer, together with any other costs associated with opening the escrow account. The escrow agreement is between the escrow provider, the Registered Funding Portal, and the issuer. Funds remain in escrow until all contingencies delineated in the agreement, such as raising a certain amount of capital or meeting the KYC/AML obligations for each investor, have been satisfied. Key benefits of working with North Capital as escrow agent include the white glove service we provide, real-time escrow reporting and visibility, and partnering with a company that has a long track record and depth of expertise with Regulation Crowdfunding.