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Happy Halloween to all our readers!

Earlier this month, we wrote about the dangers of material omissions in private placement offerings. Basically, if you’re selling stock in your company, you need to disclose all information necessary for an investor to make an informed decision. For example, if you forget to mention that your company is about to lose half its customer base, your investors can sue for rescission, allowing them to get all their money back plus interest.

How do you make sure that you don’t forget to disclose important information to your investors? Well, the short answer is, your best option is to hire a lawyer. Disclosures need to be tailored for each industry and each company. There is no magic set…

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When you sign a non-compete agreement in exchange for a $325 K severance package, you should avoid going to work for your prior employer’s rival.

When you sign a non-compete agreement in exchange for $325,000 as part of a severance agreement, you should avoid going to work for your prior employer’s rival (at least for awhile).

Former Amazon executive, Daniel Powers, signed a severance deal that he would not go work for the competition for at least 18 months. In exchange, Powers received $325,000. Rather than avoiding the “competition” and enjoying his severance pay, four months later Powers decided to accept a new job with Google, as the director of cloud platform sales.

While non-competes are not valid in California, the lawsuit that was filed by Amazon on Friday will likely stand as it was filed in Washington’s King County Superior Court. In a similar case, a…

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FINRA fined NEXT for inadequate investigations during the due diligence phase of the private placement offering by Provident Royalties.

The Financial Industry Regulatory Authority (FINRA) fined NEXT Financial Group for failing to perform reasonable investigations during the due diligence phase of the private placement offering by Provident Royalties. As a result of NEXT’s failure, investors lost hundreds of millions of dollars. NEXT will pay a $50,000 fine and $2 million in restitution to its clients. Furthermore, the SEC has accused Provident of committing fraud, and as least one of Provident’s brokers has admitted to these allegations.

As we discussed last week, due diligence requires a reasonable investigation of all the “material” facts before entering into any agreement with another person or entity. Due diligence is required and regulated in order to prevent unnecessary harm to investors. Typically, a broker is…

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iVLG's weekly News Roundup provides business owners and entrepreneurs the latest news surrounding business and recent cases and legislation.

Recent Cases

Class Action against Mobile App developer Path
In early 2012, Path was sued for alleged surreptitious collecting of mobile device address books and installation of tracking software. Path moved to dismiss the claims for lack of standing and for failure to state a claim. The court ruled that there was proper standing, but Path was successful in dismissing some of the claims. The court dismissed for failure to state a claim the plaintiff’s claims under the Electronic Communications Privacy Act, Stored Communications Act, California wiretapping statute, and state common law privacy, conversion and trespass.

However, plaintiff’s claims for violations of the California Computer Crime Law, California’s Unfair Competition Law, negligence, and unjust enrichment all survived the motion to dismiss. As support…

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Beginning on Monday, December 3, 2012, member firms of FINRA must file a copy of any offering document used in private placements.

Beginning on Monday, December 3, 2012, members of Financial Industry Regulatory Authority (FINRA) must file a copy of any private placement memorandum, term sheet, or other offering document used within 15 calendar days from the date the sale took place; the filer will have a continuing obligation to file any materially amended versions of the offering documents; if no offering documents are used, it must indicate that it did not do so; and filings must be made electronically with FINRA through the FINRA Firm Gateway.

FINRA has taken active steps to increase transparency and investor protection in private placements. In addition to the Rule 5123 filing requirements, Rule 5122 establishes standards on disclosure, use of proceeds, and a filing requirement for…

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Today’s post revisits some of the best practices for private placement due diligence that FINRA advocated for in its Regulatory Notice 10-22.

If you’ve been following securities regulation over the past three years, you’ve likely noticed the increased FINRA scrutiny on private placement due diligence. Especially with respect to broker-dealers, the Financial Industry Regulatory Authority has cracked down on numerous firms that fail to take reasonable steps to investigate issuers before recommending an issuer’s securities to the broker-dealer’s  clients. There is the potential for an increase in private placements due to the recent legislation passed, the JOBS Act. Today’s post revisits some of the best practices that FINRA suggested in its Regulatory Notice 10-22, released in April 2010.

Reasonable Investigation Depends on the Circumstances
In general, broker-dealers are required to perform a reasonable investigation concerning the issuer and its management, the business prospects of…

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Under Washington law (RCW 21.20.010), it is unlawful for any person to, in connection with the offer, sale or purchase of any security, directly or indirectly make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.

Restated, someone selling an interest in a company to an investor cannot lie about or fail to disclose an important fact. If the securities issuer makes an untrue statement or omission, the investor may be entitled to recession–meaning that the investor can get the money they invested back, plus interest.

What makes a fact or omission material?
Facts are material if a…

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iVLG's weekly News Roundup provides business owners and entrepreneurs the latest news surrounding business and recent cases and legislation.

Mergers and Acquisitions

Exxon Mobil Buys Canadian Oil and Gas Company
Oil giant Exxon Mobil agreed to terms on Wednesday to purchase Canadian oil and gas company Celtic Exploration. Exxon is paying roughly $3.1 billion in cash and stock. Exxon has been actively seeking to expand its presence in the energy-rich shale that is in western Canada.

The deal includes Exxon paying about $24.5 Canadian dollars ($24.92 USD) per share, which is roughly 35 percent above the Canadian company’s closing price. Celtic investors will also receive .5 of a share in a new company that will be led by Celtic’s current management team.

Microsoft Makes Two Deals in Two Days
Microsoft announced Wednesday that it has closed a deal to acquire MarketingPilot Software, LLC, a…

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In 1953, the SEC fought Ralston Purina Co. over whether a security offering to its employees was exempt from registering its offering with the SEC.

Typically, when you sell a security you must register the sale with the Securities and Exchange Commission (SEC). However, Section 4(2) of the 1933 Act exempts “transactions by an issuer not involving any public offering.” In these transactions, better known as private placements, the 4(2) exemptions apply to accredited investors, who are deemed by the SEC to be  sufficiently sophisticated and have sufficient bargaining power so as not to require the protection afforded by federal registration, as well as institutional investors who have obvious sophistication and bargaining power. You can learn more about the private placement exemption here.

In 1953, the SEC fought against Ralston Purina Co. over whether Ralston’s security offering to its employees was exempt under 4(2). Ralston argued that an…

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The report offers an inside look at the current real estate trends around Seattle’s neighborhoods and projections for future trends.

The following article was written by two real estate investment brokers at Kidder Matthews. Jason Rosauer and Rob Anderson (collectively Team Rosauer) lead an investment brokerage team that specializes in property sales of office, industrial, and retail buildings, as well as land development sites throughout the West Coast. They also publish monthly market reports that detail the commercial real estate market in the greater Seattle area. The report offers an inside look at the current real estate trends around Seattle’s neighborhoods and projections for future trends. We’ve broken up the Team Rosauer September Market Report into three posts: the first detailed East King County and Pierce County; the second detailed South King County and Snohomish County; and today’s post (the last in the September Market…

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