Crowdfunding

Crowdfunding Intermediaries – SEC Issues Guidance

On April 5, 2012 President Obama signed the JOBS Act into law. Part of the JOBS Act is the Crowdfunding Act, the full title of which is the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012”. The SEC has been mandated with the task of drafting the crowdfunding rules and regulations by early 2013. In addition to fashioning the exemption that will allow companies to raise funds using the Crowdfunding Act, the SEC must also fashion rules to govern the crowdfunding intermediaries that companies will be required to use in the process.

Crowdfunding Intermediaries or Funding portals (the terms are interchangeable) are hurrying up to be ready to implement rules that will be enacted in early 2013 while at the same time, waiting to find out what those rules will be. On May 7, 2012, the SEC issued limited guidance for crowdfunding intermediaries. As has been the case since enactment of the JOBS Act,

May 16, 2012

SEC Suspends Trading for Record Number of Shell Companies

The Securities and Exchange Commission (SEC) today suspended the trading in 379 dormant shell companies. This is the most trading suspensions in a single day in the history of the SEC. The trading suspensions are part of an SEC initiative tabbed Operation Shell-Expel by the SEC’s Microcap Fraud Working Group. Each of the companies was a dormant shell that was lacking any and all public disclosures. That is, each of the companies failed to have adequate current public information available either through the news service on OTC Markets or filed with the SEC via EDGAR.

The federal securities laws allow the SEC to suspend trading in any stock for up to 10 business days. Once a company is suspended from trading, it cannot be quoted again until it provides updated information including complete disclosure of its business and accurate financial statements. In addition to providing the necessary information, to begin to trade again, a company must enlist a market maker

May 14, 2012

NASDAQ Lowers Price Per Share Initial Listing Requirement

The SEC has approved the recent NASDAQ rule change to lower the minimum bid listing requirement from $4.00 to either $2.00 or $3.00 depending on qualification for certain other listing requirements. The text of the entire new rule is available on the SEC website.

Pursuant to the new rule, a security would qualify for listing on the NASDAQ Capital Market if, for at least five consecutive business days prior to approval, the security has a minimum closing price of:

A. At least $3 per share, if the issuer meets either of the following standards determined as follows:

I. Under the Equity Standard, the Issuer would need to meet, among other things:

(i) stockholders’ equity of at least $5 million;

(ii) market value of publicly held shares of at least $15 million; and

(iii) two year operating history.

II. Under the Net Income Standard, the Issuer would have to meet, among other things:

(i) net income from continuing operations

May 10, 2012

THE JOBS ACT IMPACT ON HEDGE FUND MARKETING

On April 5, 2012 President Obama signed the Jumpstart Our Business Startups Act (JOBS Act) into law. The other day I blogged about the changes to the general solicitation and advertising rules brought about by the JOBS Act. Today I am focusing on the impact those rule changes will have on hedgefunds, and in particular, smaller hedgefunds.

Summary of JOBS Act Changes Effecting General Solicitation and Advertising of Private Offerings

Title II of the JOBS Act provides that, within 90 days of the passage of the JOBS Act (i.e. July 5, 2012), the SEC will amend Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under, to eliminate the prohibition on general solicitation and general advertising in a Rule 506 offering, so long as all purchasers in such offering are accredited investors. The JOBS Act directs the SEC to make the same amendment to Rule 144A so long as all purchasers in the Rule

May 8, 2012

JOBS Act Amendments to General Solicitation and Advertising of Private Offerings

Neither a Rule 506 offering nor a Rule 144A offering will be considered a public offering (i.e. will lose its exemption) by virtue of a general solicitation or general advertising so long as the issuer has taken reasonable steps to verify that purchasers are either accredited investors or qualified institutional buyers, respectively. Since it would be impossible to ensure that only accredited investors, or qualified institutional

May 3, 2012

At-The-Market Offerings

Anyone that reads the trade journals knows that at-the-market offerings, or ATM’s as they are now known, have recently gained in popularity and are expected to continue to do so. An ATM is the offering of securities by an Issuer either directly or through an underwriter, which securities are offered and distributed at the existing trading price. In layman’s terms, an ATM occurs when an already public trading Issuer registers and sells additional securities to the public at the existing trading price, as opposed to a fixed price. Accordingly, the price that shares sell at in an ATM will vary with the market price on any given day, or even throughout the day.

Under an ATM offering program, an exchange-listed company incrementally sells newly issued shares into the trading market through a designated broker-dealer at prevailing market prices, rather than via a traditional underwritten offering of a fixed number of shares at a fixed price all at once. To

May 2, 2012

Crowdfunding intermediaries- Hurry Up and Wait

I have been blogging extensively on the JOBS Act and Crowdfunding Act. My last blog addressed Herculean effort the SEC must undertake to write the laws and rules which will bring the Crowdfunding Act to fruition by early 2013. In addition to fashioning the exemption that will allow companies to raise funds using the Crowdfunding Act, the SEC must also fashion rules to govern the funding portals that companies will be required to use in the process.

Funding Portals are popping up everywhere, at least in name and concept. All of these portals are busy putting together systems internally, but all of those systems are subject to the SEC

April 26, 2012

SEC Grapples With Crowdfunding Rulemaking

On April 5, 2012 President Obama signed the JOBS Act into law.

The SEC’s Rulemaking Duty

Some of the rules went into effect immediately; others are in the drafting process. Within 90 days of the signing of the Act (i.e. mid July), the SEC is required to issue enabling rules as to other portions of the Act, including rules related to general solicitation and advertising of accredited investors under Rule 506 of Regulation D. For the SEC that is the easy part.

Finally, the SEC has up to 270 days (beginning of 2013) to release rules relating to the new crowdfunding exemption and crowdfunding platform portal regulations. That will be difficult part. As a matter of background, the biggest opponents of the crowdfunding bill were the SEC and FINRA. It is easy to see why, the SEC’s mission, direct from their website is:

“The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly,

April 24, 2012

SEC Issues Guidance on Title 1 of the JOBS Act

On April 5, 2012 President Obama signed the JOBS Act into law. Some of the rules went into effect immediately; others are busily in the drafting process. The SEC has begun issuing guidance and it is expected will continue to do so often.

On April 16, 2012, the SEC issued guidance on Title 1 of the JOBS Act. The full text of this guidance is available on the SEC website. Title 1 of the JOBS Act provides scaled- down business disclosure for Emerging Growth Companies (EGC’s) effectively treating them as small business issuers. In particular, EGC’s need only provide two years of audited financials (instead of 3) for a registration of an IPO; are treated as small businesses for the reporting of executive compensation; have no Sarbanes-Oxley Act 404(b) auditor attestation requirements and are able to test the waters with communications to QIB’s and institutional accredited investors prior to an offering.

Determining When and If a Company Qualifies As

April 23, 2012

Crowdfunding Timing and Investor Protections

On April 5, 2012 President Obama signed the JOBS Act into law.

Some of the rules went into effect immediately, such as the ability of an Emerging Growth Company to file a registration statement and seek confidential treatment during the review process. For this process the EGC would avail itself of the new Securities Act Section 6(e). The SEC issued, albeit limited, guidance on this process for EGC’s yesterday, April 10, 2012.

Within 90 days of the signing of the Act (i.e. mid July), the SEC is required to issue enabling rules as to other portions of the Act, including rules related to general solicitation and advertising under Regulation D. Finally, the SEC has up to 270 days (beginning of 2013) to release rules relating to the new crowdfunding exemption and crowdfunding platform portal regulations.

Crowdfunding Has Been Around For Several Years

It seems to many that the JOBS Act appeared, was enacted into law and is zooming forward

April 20, 2012

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Crowdfunding

Crowdfunding Intermediaries – SEC Issues Guidance

SEC Suspends Trading for Record Number of Shell Companies

NASDAQ Lowers Price Per Share Initial Listing Requirement

THE JOBS ACT IMPACT ON HEDGE FUND MARKETING

JOBS Act Amendments to General Solicitation and Advertising of Private Offerings

At-The-Market Offerings

Crowdfunding intermediaries- Hurry Up and Wait

SEC Grapples With Crowdfunding Rulemaking

SEC Issues Guidance on Title 1 of the JOBS Act

Crowdfunding Timing and Investor Protections

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