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Tagged Posts: general solicitation’

More Clarification on How To Raise Money Without Registration: SEC Issues Compliance and Disclosure Interpretations on Exempt Offerings (Part 2)

October 31, 2015

Verification of Accredited Investor Status.

The next set of questions are related to the requirement under Rule 506(c) that an issuer take reasonable steps to verify, and form a reasonable belief regarding, the accredited investor status of a purchaser at the time of the sale of securities.[1]  This is important because, to qualify for an exemption from registration, an issuer must meet all the terms and conditions of the exemption, and verification of accredited investor status is a requirement under Rule 506(c).… Read the rest

More Clarification on How To Raise Money Without Registration: SEC Issues Compliance and Disclosure Interpretations on Exempt Offerings (Part 1)

October 27, 2015

On August 6, 2015, the Securities and Exchange Commission (“SEC”) issued Compliance and Disclosure Interpretations (“C&DIs”). For the full text of the C&DIs, click here. C&DIs are not rules, regulations, or statements of the SEC, but reflect the current views of the staff of the agency, which should be of interest to many businesses that want to raise capital through exempt offerings. The recent C&DIs deal with a multitude of issues, through questions and answers, but in this blog series, we will focus on three topics that are particularly relevant: accredited investor status, general solicitation, and intrastate exemption.… Read the rest

Other Exemptions Under Regulation D and the Overwhelming Popularity of Rule 506

August 25, 2015

Regulation D, Rule 506

As you can see, the overwhelming popularity of Rule 506 is largely the result of preemption of state securities laws.  In fact, an analysis of Regulation D offerings based on approximately 27,000 Form Ds filed between September 15, 2008 and October 18, 2010 shows that even transactions with smaller offering amounts, for which Rule 504 or Rule 505 were specifically designed, overwhelmingly elected to use Rule 506.[1]

Imagine, for example, a small business that proposes to raise $1 million by offering its securities in three states.… Read the rest

Other Exemptions Under Regulation D and the Overwhelming Popularity of Rule 506

August 22, 2015

Regulation D, Rule 505

Rule 505 of Regulation D provides an exemption for offerings up to $5,000,000 in a 12-month period.[1]  This exemption is not available to investment companies[2] or the so-called “bad actors.”[3]  Just like in Rule 504 offerings, a company cannot use general solicitation or advertising to sell the securities in Rule 505 offerings.[4]  And just like in other Regulation D offerings, Rule 505 securities are restricted securities[5] and issuers need to file Form D with the SEC.… Read the rest

Other Exemptions Under Regulation D and the Overwhelming Popularity of Rule 506

August 15, 2015

An Overview of Exemptions

In our previous posts on exempt offerings and crowdfunding, we discussed some of the most commonly used exemptions from the registration requirements of the federal securities laws, including Regulation A and Rule 506(b) under Regulation D, as well as the new and pending exemptions under the JOBS Act, including Rule 506(c), Regulation A+, and the CROWDFUND Act.  We also mentioned that, while each exemption has its pros and cons, Rule 506 is the exemption used for more than 90 percent of all exempt offerings in the United States.… Read the rest

Update on Eureeca Capital

August 11, 2015

In our previous posts on Eureeca Capital (available here and here), we looked at Eureeca’s ill-fated attempt to operate a crowdfunding platform in the U.S. as a cautionary tale on how not to conduct an exempt offering.[1]  We mentioned that, in anticipation of the institution of the SEC proceedings, Eureeca undertook voluntary remedial actions and submitted an offer of settlement to the agency, including civil penalties of $25,000, which the SEC determined to accept.  We also mentioned that Eureeca’s website now features a prominent disclaimer and information page that provides information about what constitutes “U.S.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.