Category: SEC

SEC: On December 18, 2015, the SEC issued a 118-page report on the definition of “Accredited Investor” (the “Report”). The report follows the March 2015 SEC Advisory Committee on Small and Emerging Companies (the “Advisory Committee”) recommendations related to the definition. The SEC is reviewing the definition of “accredited investor” as directed by the Dodd-Frank Act, which requires that the SEC review the definition as relates to “natural persons” every four years to determine if it should be modified or adjusted…

Jul282015

Intrastate Crowdfunding Legislation Has Passed in Florida

ABA Journal’s 10th Annual Blawg 100

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Florida Has Passed Intrastate Crowdfunding Legislation

As the country waits for the SEC to publish final Title III crowdfunding rules as required by the JOBS Act, states continue to enact and introduce state-specific crowdfunding legislation.   As of today, it is unclear when the final federal rules will be released and passed into law though SEC Chair Mary Jo White has publicly stated on several occasions that it will be this year.  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 the final rules.  Federal crowdfunding is coming, but it is a slow process.

Florida is the newest state to pass intrastate crowdfunding legislation.  The new Florida Intrastate Crowdfunding Exemption takes effect October 1, 2015. As

Jun302015

Going Public Transactions For Smaller Companies: Direct Public Offering And Reverse Merger

ABA Journal’s 10th Annual Blawg 100

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Introduction

One of the largest areas of my firms practice involves going public transactions.  I have written extensively on the various going public methods, including IPO/DPOs and reverse mergers.  The topic never loses relevancy, and those considering a transaction always ask about the differences between, and advantages and disadvantages of, both reverse mergers and direct and initial public offerings.  This blog is an updated new edition of past articles on the topic.

Over the past decade the small-cap reverse merger, initial public offering (IPO) and direct public offering (DPO) markets diminished greatly.  The decline was a result of both regulatory changes and economic changes.  In particular, briefly, those reasons were:  (1) the recent Great Recession; (2) backlash from a series of fraud allegations, SEC enforcement actions, and trading suspensions of Chinese companies following reverse mergers; (3) the 2008 Rule 144 amendments, including the prohibition of use of the rule for shell company

Jun162015

SEC Has Approved A Two-Year Tick Size Pilot Program For Smaller Public Companies

ABA Journal’s 10th Annual Blawg 100

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On May 6, 2015 the SEC approved a two-year pilot program with FINRA and the national securities exchanges that will widen the minimum quoting and trading increments, commonly referred to as tick sizes, for the stocks of smaller public companies.  The goal of the program is to study whether wider tick sizes improve the market quality and trading of these stocks. 

The basic premise is that if a tick size is wider, the spread will be bigger, and thus market makers and underwriters will have the ability to earn a larger profit on trading.  If market makers and underwriters can earn larger profits on trading, they will have incentive to make markets, support liquidity and issue research on smaller public companies.  The other side of the coin is that larger spreads and more profit for the traders equates to increased costs to the investors whose accounts are being traded. 

The tick size program

May262015

SEC Congressional Testimony – Part 3

ABA Journal’s 10th Annual Blawg 100

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On three occasions recently representatives of the SEC have given testimony to Congress.  On March 24, 2015, SEC Chair Mary Jo White testified on “Examining the SEC’s Agenda, Operations and FY 2016 Budget Request”; on March 19, 2015, Andrew Ceresney, Director of the SEC Division of Enforcement, testified to Congress on the “Oversight of the SEC’s Division of Enforcement”; and on March 10, 2015, Stephen Luparello, Director of the Division of Trading and Markets, testified on “Venture Exchanges and Small-Cap Companies.”  In a series of blogs, I will summarize the three testimonies.

In this last blog in the series I am summarizing the testimony of Stephen Luparello, Director of the Division of Trading and Markets, on “Venture Exchanges and Small-Cap Companies.”  The topic of venture exchanges and small-cap companies is of particular importance to me and my clients – it is the world in which we participate.

On May 5, 2015, I

May122015

SEC Proposes Broadening Of Broker-Dealer Registration Rules To Include Proprietary And High-Frequency Traders

ABA Journal’s 10th Annual Blawg 100

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On March 25, 2015, the SEC proposed rule amendments to require high-frequency and off-exchange traders to become members of FINRA.  The amendments would increase regulatory oversight over these traders.

Over the years many active cross-market proprietary trading firms have emerged, many of which engage in high-frequency trading.  These firms generally rely on the broad proprietary trading exemption in rule 15b9-1 to forgo membership with, and therefore regulatory oversight by, FINRA.  The rule change is specifically designed to require these high-frequency traders to become members of FINRA and submit to its review and oversight. 

The proposed rule change amends Rule 15b9-1 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) to narrow a current exemption from FINRA membership if the broker is a member of a national securities exchange, carries no customer accounts and has annual gross income of no more than $1,000 derived from sources other than the exchange to

Apr282015

SEC Congressional Testimony– Part II

ABA Journal’s 10th Annual Blawg 100

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SEC CONGRESSIONAL TESTIMONY – PART II

On three occasions recently, representatives of the SEC have given testimony to Congress.  On March 24, 2015, SEC Chair Mary Jo White testified on “Examining the SEC’s Agenda, Operations and FY 2016 Budget Request”; on March 19, 2015, Andrew Ceresney, Director of the SEC Division of Enforcement, testified to Congress on the “Oversight of the SEC’s Division of Enforcement”; and on March 10, 2015, Stephen Luparello, Director of the Division of Trading and Markets, testified on “Venture Exchanges and Small-Cap Companies.”  In a series of blogs, I will summarize the three testimonies. 

In the first blog in the series, which can be read HERE, I summarized Mary Jo White’s testimony.  This second blog in the series summarizes the testimony of Andrew Ceresney and in particular his words on the SEC’s enforcement focus for fiscal year 2016.

Andrew Ceresney, Director Division of Enforcement – Testimony to Congress

Apr142015

SEC Congressional Testimony- Part I

ABA Journal’s 10th Annual Blawg 100

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On three occasions recently representatives of the SEC have given testimony to Congress.  On March 24, 2015, SEC Chair Mary Jo White testified on “Examining the SEC’s Agenda, Operations and FY 2016 Budget Request”; on March 19, 2015, Andrew Ceresny, Director of the SEC Division of Enforcement, testified to Congress on the “Oversight of the SEC’s Division of Enforcement”; and on March 10, 2015, Stephen Luparello, Director of the Division of Trading and Markets, testified on “Venture Exchanges and Small-Cap Companies.”  In a series of blogs, I will summarize the three testimonies.  This first blog in the series summarizes the testimony of Mary Jo White.

Mary Jo White Testimony

On March 24, 2015, SEC Chair Mary Jo White gave testimony before the United States House of Representatives Committee on Financial Services.  The testimony was titled “Examining the SEC’s Agenda, Operations and FY 2016 Budget Request.”  As can be gleaned from the title, Mary