Category: JOBS ACT and Crowdfunding

JOBS ACT and Crowdfunding: As the expected deadline for the SEC to publish rules and regulations enacting the Crowdfunding Act (Title III of the Jumpstart Our Business Startups Act (JOBS Act)) grows nearer, it is a good time for a complete overview of crowdfunding. New Sections 4(6) and 4A of the Securities Act of 1933 codify the crowdfunding exemption and its various requirements as to Issuers and intermediaries. The SEC is in the process of drafting the underlying rules and regulations which will implement these new statutory provisions…

Jan062015

SEC Issues Several Proposed Rule Changes Pertaining To JOBs Act

ABA Journal’s 10th Annual Blawg 100

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On December 18, 2014, the SEC published proposed rule amendments to implement portions of Title V and Title VI of the JOBS Act by amending rules promulgated under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”).  The proposed amendments will revise the Section 12(g) rules to reflect the new, higher shareholder thresholds for triggering registration requirements and for allowing the voluntary termination of registration or suspension of reporting obligations.  The proposed rules also make similar changes related to banks, bank holding companies, and savings and loan companies. 

The proposed rules establish the time for determining accredited status for purposes of calculating shareholders of record and the corresponding application of the registration and deregistration rules.  In particular, the proposed rules set the last day of the fiscal year as the relevant calculation moment effectively imposing an obligation on issuers to obtain, and investors to give, updated representations following an initial

Dec022014

Private Offering Rule Changes Since JOBS Act

ABA Journal’s 10th Annual Blawg 100

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As the end of 2014 approaches, I find myself reflecting on the significant successes and failures in the private offering arena since the enactment of the Jumpstart our Business Startups Act (“JOBS Act”) on April 5, 2012.  Some provisions under the JOBS Act became law without further rule-making action on the part of the SEC; others took time to pass; and significantly, Title III Crowdfunding, the most anticipated change in capital market access, has completely stalled.  This blog is a summary of the in-depth detailed blogs I’ve previously written on each of these topics with some added commentary.

506(c) – The Elimination of the Prohibition Against General Solicitation and Advertising in Private Offerings to Accredited Investors; Broker-Dealer Exemption for 506(c) Funding Websites

The enactment of new 506(c) resulting in the elimination of the prohibition against general solicitation and advertising in private offerings to accredited investors has been a slow but sure success.  Trailblazers

Oct212014

SEC Issues Advertising Guidance Related to State-Specific Crowdfunding

ABA Journal’s 10th Annual Blawg 100

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As required by Title III of the JOBS Act, on October 23, 2013, the SEC published proposed crowdfunding rules.  The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire 584-page text of the rule release is available on the SEC website.  As of today, it is unclear when final rules will be released and passed into law and what changes those final rules will have from the proposed rules.  Moreover, upon passage of the final rules, there will be a period of ramping-up time in which crowdfunding portals complete the process of registering with the SEC, becoming members of FINRA and completing the necessary steps to ensure that their portal operates in compliance with those final rules.  Federal crowdfunding is coming, but it is a slow process.

In the meantime, several states have either enacted or introduced state-specific crowdfunding legislation.

Federal Authority for State Crowdfunding Legislation

Both the federal government

Jul072014

Case Study of Online Funding as Related to Broker-Dealer Exemptions

Introduction

As a recurring topic, I am discussing exemptions to the broker-dealer registration requirements for entities and individuals that assist companies in fundraising and related services.  On February 18th I published a blog about the new no-action-letter-based exemption for M&A brokers, the exemptions for websites restricted to accredited investors and for crowdfunding portals as part of the JOBS Act.  Further on, I wrote on the statutory exemption from the broker-dealer registration requirements found in Securities Exchange Act Rule 3a4-1, including for officers, directors and key employees of an issuer.

This blog addresses the statutory and related exemptions that affect, and would permit, the operation of a funding website, including the statutory exemption from broker-dealer registration enacted into law as part of the JOBS Act on April 5, 2012.  This blog also includes an analysis of a fictional funding website.

Summary of Exemption from Broker-Dealer Registration Found in Title II of the JOBS Act

Title II of the JOBS Act created

Mar112014

Crowdfunding Using Intrastate Offerings and Rule 147 – Is Florida Next?

As required by Title III of the JOBS Act, on October 23, 2013, the SEC published proposed crowdfunding rules.  The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire 584-page text of the rule release is available on the SEC website. The proposed rules invite public comment on many points and have indeed resulted in such comments.  As of today, it is unclear when final rules will be released and passed into law and what changes those final rules will have from the proposed rules.  Moreover, upon passage of the final rules, there will be a period of ramping up time in which crowdfunding portals complete the process of registering with the SEC, becoming members of FINRA and completing the necessary steps to ensure that their portal operates in compliance with those final rules.  Federal crowdfunding it coming, but it is a slow process.

In the meantime, many states have recently either enacted or introduced state-specific crowdfunding

Feb182014

The SEC Establishes Key Exemption to the Broker-Dealer Registration Requirements for M&A Brokers

On January 31, 2014, the SEC Division of Trading and Markets issued a no-action letter in favor of entities effecting securities transactions in connection with the sale of equity control of private operating businesses (“M&A Broker”).  The SEC stated that it would not require broker-dealer registration for M&A Brokers arranging for the sale of private businesses, in accordance with the facts and circumstances set forth in the no action letter, as described below.

For many years the SEC has maintained a staunch view that any and all activities that could fall within the broker-dealer registration requirements set forth in Section 15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), require registration. See also the SEC Guide to Broker-Dealer Registration (2008) on the SEC website.

In accordance with the SEC Guide to Broker-Dealer Registration, providing any of the following services may require the individual or entity to be registered as a broker-dealer:

  • “finders,” “business brokers,” and
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Jan142014

Proposed Crowdfunding Rules – Part IV

As required by Title III of the JOBS Act, on October 23, 2013, the SEC published proposed crowdfunding rules.  The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire text of the rule release is available on the SEC website.  In a series of blogs, I am summarizing the lengthy rule release.  This Part IV of my series continues a discussion of the in-depth disclosure requirements for Issuers for use in their offering statements.  In particular, Parts II and III addressed the Issuer disclosure requirements, other than financial disclosures.  This Part IV in the series discusses Issuer financial disclosure obligations.

Summary Breakdown of Proposed New Rules – Requirements on Issuers

Disclosure Requirements

Pursuant to the CROWDFUND Act as set forth

Dec102013

Proposed Crowdfunding Rules – Part III

As required by Title III of the JOBS Act, on October 23, 2013, the SEC has published proposed crowdfunding rules.  The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire text of the rule release is available on the SEC website.  In a series of blogs, I am summarizing the lengthy rule release.  This Part III in my series continues a discussion of the in-depth disclosure requirements for Issuers for use in their offering statements.  Part IV will discuss financial disclosure obligations.

Summary Breakdown of Proposed New Rules – Requirements on Issuers

Disclosure Requirements

Pursuant to the CROWDFUND Act as set forth in the JOBS Act, an Issuer who offers or sells securities in a crowdfunding offering must file with the SEC and provide investors and the funding intermediary (whether a funding portal or broker-dealer) and make available to potential investors:

(a) The name, legal status, physical address, and website address of the Issuer (discussed in Part II of

Dec032013

Proposed Crowdfunding Rules – Part II

As required by Title III of the JOBS Act, on October 23, 2013, the SEC has published proposed crowdfunding rules.  The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire text of the rule release is available on the SEC website.

Background

Crowdfunding generally is where an entity or individual raises funds by seeking small contributions from a large number of people.  The crowdfunder sets a goal amount to be raised from the crowd with the funds to be used for a specific business purpose.  In addition, a crowdfunding campaign allows the crowd to communicate with each other, thus adding the benefit of the “wisdom of the crowd.”  Small businesses can particularly benefit from crowdfunding as they are not limited by

Nov192013

Proposed Crowdfunding Rules – Part I

As required by Title III of the JOBS Act, on October 23, 2013, the SEC has published proposed crowdfunding rules.  The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire text of the rule release is available on the SEC website.

Background

Crowdfunding generally is where an entity or individual raises funds by seeking small contributions from a large number of people.  The crowdfunder sets a goal amount to be raised from the crowd with the funds to be used for a specific business purpose.  In addition, a crowdfunding campaign allows the crowd to communicate with each other, thus adding the benefit of the “wisdom of the crowd.”  Small businesses can particularly benefit from crowdfunding as they are not limited by restrictions on general solicitation and advertising or purchaser qualification requirements.

Title III of the JOBS Act, called the Crowdfund Act, amends Section 4 of the Securities Act of 1933 (the Securities Act), adding new Section 4(a)(6) to