Practical advice. Flat rates. Plain language.

Search Results for: sec

NASAA to Investigate Further into Early Crowdfunding Platforms Jumping the Gun

NASAA decided to look further into these crowdfunding sites in an effort to reduce fraud and crack down on those companies that have jumped the gun.

  Gavin Johnson

I read a Wall Street Journal article today about the recent investigation into websites claiming to be crowdfunding platforms. Of the reported 9,000 websites that contain the word “crowdfund” in their website names, the North American Securities Administrators Association (NASAA)—the organization that represents state securities regulators—has investigated roughly 2,000, and plans to give a closer look at 200 of those.

Why the investigation in the first place? Well, many securities regulators are concerned that the “relaxed” rules governing securities offerings for private companies might present an opportunity for fraud. NASAA has decided to look further into these crowdfunding sites in an effort to reduce the likelihood of fraud and crack down on those companies that have jumped the gun on crowdfunding...

Read More

New Law Makes Resale of Private Stock Easier

This post discusses Section 4(a)(7) of the Securities Act of 1933 and its impact in potentially making the resale of private stock easier.

  Gavin Johnson

Congress recently passed a new securities law exemption (Section 4(a)(7) of the Securities Act of 1933) that eases the limitations and restrictions surrounding the resale of private stock.  Prior to the new law, there were several regulatory hurdles that made the resale of private stock in a company difficult. As we’ve highlighted in prior posts, securities regulations require any sale of stock to be registered with the SEC (a time-consuming, expensive process), unless the sale is “exempt”—which means that the sale falls within one of the exemptions provided for in the securities regulations. (Check out one of our prior posts on securities exemptions and Rule 144 for more background on the regulations specifically surrounding selling stock in private companies as they applied...

Read More

Raising Capital in Washington State: Part 4

This post discusses raising capital for your business through Rule 506, under which there is no maximum offering amount, you can sell to an unlimited number of accredited investors, and you cannot sell to more than 35 non-accredited investors.

  Collin Roberts

In a recent post I provided an overview of raising capital under Washington States WAC 460-44A-505 (Rule 505). Today, I’m going to explain another exemption provided for by Federal and State law under which a company can raise capital, Rule 506. The basics of Rule 506, codified in WAC 460-44A-506, are as follows:

1) There is no maximum offering amount;

2) You can sell to an unlimited number of accredited investors;

3) You cannot sell to more than 35 non-accredited investors (you don’t want to sell to any non-accredited investors, however).

Disclosure Requirements

As discussed in our last post, the Securities Act of 1933 and 1934 were primarily put into place to protect investors in the wake of the stock market crash of 1929. In light of this, the most important factor in any securities offering is...

Read More

What You Should Know About Reselling Private Stock

In this blog post we discuss what you need to know about reselling stock of private companies under Rule 144.

  Kyle Hulten

If you purchased stock from a startup in a “friends and family” round, can you sell it to someone else without violating securities laws? The answer to that question probably depends on whether you’re in compliance with Rule 144, which provides requirements that if satisfied, allow people to re-sell privately issued stock.


There’s a general rule in the Securities Act of 1933 that if you sell a non-exempt security to another person, the sale must be registered unless an exemption from registration applies.

There’s a few things to unpack here. First, what is a non-exempt security? Second, what does it mean for the sale to be registered? Third what are the exemptions from registering the sale?

Exempt Securities Section 3 of the Securities Act...

Read More

You Can Now Use Crowdfunding in Washington State

A blog post discussing how businesses in Seattle and around the state of Washington can now use crowdfunding to raise capital for their startups.

  Kyle Hulten

As of this month, you can officially utilize crowdfunding to raise money in Washington for your startup. This new opportunity allows companies to advertise their securities offering and raise money from all investors. Traditional securities offerings restrict advertising and limit offerings to those who satisfy the income and net worth standards to qualify as an accredited investor. This new opportunity is different from platforms like Kickstarter, because with Kickstarter campaigns you can’t offer stock in exchange for the donations; instead the donations are usually straight gifts or made in exchange for a product or promotional item. Crowdfunding is not yet available on a national scale despite a section in the JOBS Act directing the SEC to enact crowdfunding rules (Congress...

Read More

Due Diligence | Part 7 | Miscellaneous Issues

In the final post in our due diligence section of our series on the purchase and sale of a business we explore the miscellaneous issues in due diligence.

  Gavin Johnson

We’ve finally arrived at the last post in our due diligence section of our series on the purchase and sale of a business. In today’s post we explore some of the miscellaneous issues you should be aware of during due diligence.

Real Property Issues We’ve mentioned in previous posts that you should review all “material” contracts, which would include all leases, deeds, or other real property-related contracts. However, there are other, lesser known, real property issues that are often overlooked during due diligence. One of these “other” issues is easements and other restrictions on your ability to use the real property as you’d like.

An easement is a right of use over the property of another. For example, you may be purchasing a...

Read More

Due Diligence | Part 2 | Legal Issues

This post discusses legal issues you should consider during the due diligence process of the purchase and sale of a business.

  Gavin Johnson

In the introduction to due diligence, we explained the importance of engaging in extensive due diligence prior to purchasing a business, and we broke down due diligence into six categories. Today’s post will highlight the key legal issues the purchaser should be aware of when purchasing a business.

Reviewing the Owner’s Governing Documents Prior to any acquisition, the purchaser will need to know the basic organizational structure of the business, i.e. how it was formed, its governing documents, and its key personnel. Knowing how the business is organized will dictate how the transaction will be structured.

Securities Matters Is the purchase going to be structured as a stock purchase? How many shareholders currently own stock in the company? Is there a shareholder agreement? Are...

Read More

News Roundup 2012 Week Two: Securities Regulations; Executive Compensation; SOPA Protests; Regional News; Koomey’s Law

  Kyle Hulten

Hedge Fund Managers Petition SEC to Remove Prohibition on General Solicitation Under current regulations, issuers of securities in private placements are restricted in how they can solicit potential investors. The Managed Funds Association has petitioned the SEC to eliminate the prohibition on general solicitation and advertising in Regulation D under the Securities Act of 1933 (“Securities Act”) for offerings or sales by private funds. In the petition the MFA points out that the regulations prohibiting general solicitation are vague, and argues that the uncertainty surrounding the vague rules is harmful to business. For an in-depth look at the petition check out Jim Hamilton’s blog.

Executive Compensation: Discovery Channel’s New CFO Gets Paid to Join and to Leave The Discovery Channel filed their 8-K...

Read More

SBA Offers Entrepreneurs an Intro to Crowdfunding Course

This post briefly describes the objectives of the SBA's new Intro to Crowdfunding Course, which provides users with the basics of crowdfunding.

  Gavin Johnson

The U.S. Small Business Administration has created a self-paced online course that provides an overview of crowdfunding. The course takes 30 minutes to complete and gives entrepreneurs the basic knowledge that is necessary to engage in the process of crowdfunding.

The SBA has identified three objectives for the course:

Discover what crowdfunding is and how it can help entrepreneurs Define and describe components involved in crowdfunding Sharing resources to help your new business succeed

You can access the course here, or you can review the text of the course here.

Keep in mind, this is just an overview of crowdfunding, i.e. a very high level view. If you’re interested in pursuing this type of fundraising in the future, we urge you to consult with an attorney...

Read More

Proposed Rules for Title III of the JOBS Act (Crowdfunding) Released

A summary of the the proposed rules for Title III of the Jobs Act, which are full of obstacles to trip up companies using crowdfunding to raise capital.

  Gavin Johnson

Last Wednesday, the SEC released its proposed rules for Title III of the JOBS Act—the rules that will govern crowdfunding. The proposed rules are long (585 pages), complicated, and full of obstacles to trip up companies trying to utilize this form of raising capital. 

In an attempt to try and digest the nearly 600 pages, AngelList’s COO Kevin Laws has started a working summary of the Title III proposed crowdfunding rules. Of course, these rules are simply proposed at this point so you should keep in mind that these are not final and may be changed before they are implemented. Laws’ summary is provided as a Google doc that he is updating as he receives feedback.

If you’re a crowdfunding advocate or...

Read More