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Federal Class-Action Securities Lawsuits Slow Down in 2012

New study by Cornerstone Research notes 152 federal class-action lawsuits were filed in 2012, well below the average of 193 for the prior 15 years.

  Gavin Johnson

The stock market improved in 2012 and the demand for federal shareholder lawsuits slowed down. Coincidence? I think not. The better the market is performing, the happier shareholders will be.

A new study by Cornerstone Research reports that 152 federal class-action securities lawsuits were filed in 2012. This number of cases is well below the average of 193 suits in the prior 15 years, and significantly less than the 188 cases in 2011. According to the study, the drop in lawsuits was consistent across a broad spectrum of legal areas. For example, merger-related lawsuits fell by nearly 33 percent in 2012 from 2011.

Another interesting fact is that filings against Chinese companies that pursued stock listings in the U.S. fell to 10...

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Integration in Securities Offerings

Today's post discusses the concept of securities offering "integration" or "integrated transactions" in securities law and startup law.

  Gavin Johnson

When companies raise money from investors, the transaction will be governed by securities laws. These securities laws have complex requirements that often “trip up” companies unfamiliar with the rules and their application. In today’s post, we tackle one of those areas of securities and startup law where companies often trip up: integration.

What is “Integration” in the context of a securities offering?

To better understand integration, you’ll need to first understand what a “securities offering” is. In very simple terms, a securities offering is a transaction where a company is offering to sell a security in exchange for (in most cases) cash. You can check out a discussion of the more precise definition of a security in our prior post.

Integration is a term in...

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Investment Club: Securities Laws

Raising capital is a costly endeavor and it requires compliance with securities laws. One alternative is to put together an investment club.

  Collin Roberts

Raising capital is a costly endeavor and it requires compliance with securities laws. But people who want to pool their funds to help businesses grow have some options to avoid being subject to more restrictive securities requirements. One option is to put together an investment club.

What is an investment club?

Investment clubs are groups of people who pool their money together to make investments. Members of investments clubs study different types of investments and then the group decides to buy or sell based on a majority vote of the members. The meetings of members may be educational and each member must actively participate in investment decisions. Often, investment clubs are set up as partnerships.

What’s the role of the SEC?

Investment clubs...

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iVLG News Roundup 2012 Week 24: Securities Law; Shareholder Activism; Shareholder Litigation; and Mergers and Acquisitions

  Kyle Hulten Securities Law

SEC Approves New FINRA Rule 5123 Back in October of 2011, the SEC published for comment a proposed new Rule 5123. This week the SEC approved new FINRA Rule 5123, which requires broker dealers who participate in private placement offerings to file with FINRA all offering materials including private placement memoranda within 15 days of the first sale of securities.

Mergers & Acquisitions

Microsoft Reported to Have Acquired Yammer for $1.2 Billion Software giant Microsoft is reported to have purchased Yammer a social media company that targets businesses. Microsoft is expected to announce that it has purchased Yammer for $1.2 billion at the end of June. Yammer was founded in 2008, and has raised more than $140 million in venture funding. Microsoft stock jumped more than 2% on...

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News Roundup 2012 Week 11: Securities Law, Employment Law, Executive Compensation

  Kyle Hulten Securities Law

SEC Cracks Down on Sales of Private Securities The Securities and Exchange Commission has filed civil charges against three brokerage firms, Felix Investments, EB Financial, and SharesPost, that trade shares of privately held technology securities. According to the SEC, fund managers at Felix and EB Financial misled investors and took undisclosed fees and commissions. SharesPost, an online exchange for private shares, reportedly brokered transactions and failed to register as a broker-dealer. EB Financial settled for about $310,000, and SharesPost and its founder will pay about $100,000 combined. Meanwhile the SEC is progressing with a lawsuit against Felix and its manager. US legislators are considering adopting new laws that would make it easier to trade shares on the secondary markets.

Employment Law


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When is a loan subject to securities regulations?

In this blog post we look at when loans may be subject to securities regulations and why business owners should care.

  Kyle Hulten Background

What is a security? Securities are contracts for an interest in a company, sometimes called an “investment contract.” A typical example of a security transaction is the sale of company stock in exchange for cash. The SEC’s definition of “security” includes a 30-item list that stocks, notes, bonds, and investment contracts, among others. We recently discussed the Howey case, which provides the test courts use when determining whether something is an investment contract. Today’s post looks into the circumstances under which a note or loan would fall within the SEC’s definition of a security.

To start: Why does it matter if something’s a security? Securities are extensively regulated because of the real risk that individuals and the companies they control could swindle unwitting...

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What is a Security and Why Does it Matter to Your Business?

This post discusses the definition of "security" and why it is important to your business, especially if your business is seeking investment.

  Kyle Hulten

When a company sells stock to raise money, the stock is called a “security.” But “security” is not just another word for stock. The term “security” can be many different things. And unfortunately there are scammers who try to sell phony company stock and other securities to raise money and give nothing in return. Consequently, securities are one of the more heavily regulated business practices. There are all sorts of restrictions on who and how and when and where you can sell securities. If you violate these restrictions you may face financial ruin or jail or both (see: Madoff, Bernie). Because securities are so heavily regulated, it is important to know whether something you sell or purchase is a...

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Small Business Fundraising Goes Public: Advertising Your Securities Offering on a T-shirt?

That’s right folks: because of the JOBS Act you can now advertise on a T-shirt that your company is looking to raise millions of dollars.

  Gavin Johnson

Two weeks ago the SEC lifted the more than 80 year ban on using general solicitation to raise capital for your business. Companies can announce to the world that they are seeking funding, and accredited investors can connect with these companies in order to purchase the company’s shares.  A recent Wall Street Journal article details the recent changes and how they are effecting small business fundraising. Specifically, the article explores a New York-based artisan pickle business, Rick’s Picks LLC, that is using CircleUp—a third party fundraising platform that connects accredited investors with consumer-product businesses—to raise funds; a San Francisco-based children’s trading card company, Nukotoys Inc., using T-shirts to announce its fundraising; and a Washington-based broadband company, Rural Broadband Co., with...

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Amendment to Stock Legend Guidance for Restricted Securities

The Securities Division of Washington's Department of Financial Institutions adopted amendments to WAC 460-44A-502 to provide stock legend guidance for restricted securities.

  Collin Roberts

Recently, the Securities Division of Washington’s Department of Financial Institutions  adopted amendments to WAC 460-44A-502 to provide stock legend guidance for restricted securities.

The adopted amendments remove a reference to an outdated North American Securities Administrators Association (“NASAA”) guideline and instead provide the suggested language for the legends in the text itself. A “legend” on a stock certificate is a statement noting restrictions on the transfer of the stock, often due to SEC and state requirements for unregistered securities.

The new suggested legend language in Washington state is as follows:

(d) A written disclosure or legend will be deemed to comply with the provisions of WAC 460-44A-502 (4)(b) or (c) if it states:

“(i) These securities have not been registered under the Securities Act of...

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iVLG News Roundup Week 25: Securities Regulation; Mergers and Acquisitions; Local News; Etc.

  Kyle Hulten Securities Regulation

Congress Examining IPO Process in Wake of Facebook Offering A bipartisan group of congressional members are calling for an overhaul of the initial public offering process after Facebook’s stock dropped precipitously after it became listed on a public exchange. In a June 19, 2012 letter to Mary Schapiro chairman of the SEC, Rep Darrell Issa chairman of the Committee on Oversight and Government Reform, expressed concern that under existing securities laws:

“underwriters have discretion to determine the price of an IPO, while subject to conflicts of interest stemming from economic relationships with those institutional clients that ultimately will purchase the bulk of an issuance. In conjunction with this discretion, communications restrictions and legal liability enable underwriters to provide information to institutional...

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