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Definition of Accredited Investor To Be Expanded? (Part III)

November 21, 2016

On February 1, 2016, the House of Representatives passed H.R. 2187, titled “Fair Investment Opportunities for Professional Experts Act.”[1]  The bill, whose stated purpose is to direct the SEC to revise its regulations regarding the qualifications of natural persons as accredited investors, seeks to expand the definition of accredited investor.  Specifically, the bill proposes to add non-financial measures of sophistication to include the following persons in the pool of accredited investors: (i) any natural person who is currently licensed or registered as a broker or investment adviser by the SEC, FINRA, or any similar self-regulatory organization, or the securities division of a state responsible for licensing or registration of individuals in connection with securities activities; and (ii) anyone the SEC determines, by regulation, to have demonstrable education or job experience to qualify such person as having professional knowledge of a subject related to a particular investment and whose education or job experience is verified by FINRA or any similar self-regulatory organization. … Read the rest

Definition of Accredited Investor To Be Expanded? (Part II)

November 10, 2016

In our last post, we looked at the recent recommendations by the Securities and Exchange Commission’s (“SEC”) Advisory Committee on Small and Emerging Companies (the “Committee”) to expand the definition accredited investor.[1]  For those who are familiar with the Committee’s activities, this was not the first time it recommended expanding the definition of accredited investor.  In March 2015, for example, the Committee recommended that any modifications to the definition should have the effect of expanding, not contracting, the pool of accredited investors.… Read the rest

Definition of Accredited Investor To Be Expanded? (Part I)

November 8, 2016

In our previous blog post Raising Capital Through Exempt Offerings, we talked about some of the most commonly used exemptions for securities offerings.  Of note, we mentioned that Rule 506 promulgated under Regulation D is the most widely used transactional exemption for securities offerings, used in more than 90% of all exempt offerings in the United States.[1]  To understand how exemptions under Regulation D work, it is important to understand the concept of “accredited investor,” as it is often embedded in the conditions of such exemptions. … Read the rest

When Do You Need Securities Law Advice?

September 13, 2016

Startups and early-stage companies often ask us when they need securities law advice (other than when obviously dealing with securities).  Our answer is: as soon as you start thinking about raising capital or bringing in investors.  Here’s why.

Under the federal securities laws, a company may not offer or sell securities unless the offering has been registered with the SEC or an exemption from registration is available.  The legal definition of “security” is extremely broad and includes, among other things:

“any note, stock, treasury stock, security future, security-based swap, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, .… Read the rest

Federal Crowdfunding Goes into Effect on May 16, 2016 (Part VI)

June 14, 2016

Fix Crowdfunding Act.  

We have been blogging about federal crowdfunding in this blog series this past month or so. As you know, Title III of the JOBS Act, also referred to as the “CROWDFUND Act (Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012),” exempts up to $1 million crowdfunded securities from the federal registration requirement when the transaction is conducted in certain ways.[1] For a detailed analysis of the final rules, please see our previous blog series “Is It Time To Do Crowdfunding To Raise Money?: SEC Releases Federal Crowdfunding Final Rules.” Even before the final rules went into effect, however, efforts to amend Title III had been underway.… Read the rest

Federal Crowdfunding Goes into Effect on May 16, 2016 (Part V)

June 7, 2016

SEC Small Entity Compliance Guide and Compliance and Disclosure Interpretations for Issuers.

On May 13, 2016, the Securities and Exchange Commission (“SEC”) released two guidance documents on crowdfunding for issuers: “Regulation Crowdfunding: A Small Entity Compliance Guide for Issuers” and “Regulation Crowdfunding: Compliance and Disclosure Interpretations (C&DIs).” [1]  For details of the final rules, including requirements for issuers, please see our previous blog series “Is It Time To Do Crowdfunding To Raise Money?: SEC Releases Federal Crowdfunding Final Rules.” The compliance guide and C&DIs explain the final rules in plain English, some of which we highlight below.… Read the rest

Federal Crowdfunding–Finally Here–Goes into Effect on May 16, 2016 (Part IV)

May 31, 2016

FINRA’s Funding Portal Rules.

The federal crowdfunding final rules require that each intermediary in a crowdfunding transaction be registered with the Securities and Exchange Commission (“SEC”) either as a broker-dealer or a funding portal and be a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), which is currently the only registered national securities association. For details of the final rules, including registration and disclosure requirements for intermediaries, please see our previous series “Is It Time To Do Crowdfunding To Raise Money?: SEC Releases Federal Crowdfunding Final Rules.” FINRA has finalized its funding portal rules and the SEC approved them on January 29, 2016, making them effective as of that date.Read the rest

Federal Crowdfunding–Finally Here–Goes into Effect on May 16, 2016 (Part III)

May 24, 2016

SEC: A Small Business Compliance Guide on Registration of Funding Portals.

On February 29, 2016, the Securities and Exchange Commission (“SEC”) issued “A Small Entity Compliance Guide: Registration of Funding Portals.” [1] The full text of the investor bulletin is available here. One of the requirements for crowdfunding under JOBS Act is that it be done through an intermediary; no issuer can do crowdfunding directly without using one. [2] For details of the final rules, including registration and disclosure requirements for intermediaries, please see our previous series “Is It Time To Do Crowdfunding To Raise Money?: SEC Releases Federal Crowdfunding Final Rules.” The compliance guide focuses only on the registration requirements.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.