Corporate Finance & Securities

FINRA Authorizes Collection of Information from Funding Platforms

The frustrations have been loud and clear from funding platforms, investors, and bloggers alike regarding the SEC’s failure to implement rules governing online fundraising under the JOBS Act. The SEC has been dragging its feet and has missed just about every deadline that was set for it to enact the regulations that will allow investors and fundraisers to connect via online funding portals. However, in early December FINRA took a small step in the right direction.

The FINRA Board of Governors met to discuss a number of regulatory issues, including funding portals and the JOBS Act. The result? The Board authorized FINRA to create a form that is geared towards obtaining information from funding platforms that are intending to register with...

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Corporate Finance & Securities

FINRA Guidance for Private Placement Due Diligence

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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Business Startup

Is Revenue-Based Investing Changing the Investment Landscape?

Regardless of your position, entrepreneur or investor (or both), you’ve likely noticed that the investment landscape is changing. There’s a move away from traditional venture capital and institutional funding toward  micro-VC and super angel funds—smaller-scale versions of VC funds, typically in the $10-50 million range, that make a wider range of smaller investments.  Furthermore, due to the roller coaster nature of financial markets, exits are being drawn out longer  than the traditional three to five year range. This means angels are not seeing returns as quickly as they did in the 1990s and early 2000s. Not to mention, there’s another potential change on the horizon with the emergence of companies like kickstarter.com and recent legislation, including the JOBS Act which includes the CROWDFUND Act.

As a result,...

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Business Startup

Want to Learn More About the History of Crowdfunding?

I recently stumbled across a Forbes article that provides a very informative look into the history of crowdfunding. The article uses a handy infographic created by Fundable and Earn MBA Degree. Much of the discussion as of late in the SEC has surrounded the JOBS Act that was passed in April 2012. One part of the JOBS Act is crowdfunding, an innovative way for small businesses to use online, fundraising platforms to pitch their businesses to investors.

The article highlights the shift in traditional marketing and “pitching” of businesses, with a focus on building a broad base of supporters before, during, and after the launch of your business. If you want to learn more about the history of crowdfunding, check out the full Forbes...

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Business Startup

iVLG News Roundup Week 35: JOBS Act; Venture Capital; Mergers and Acquisitions; Dispute Resolution

Securities Regulation

SEC Issues Proposed Rules to Implement Title II of the JOBS Act Last Wednesday the SEC submitted for comment proposed rules to implement Title II of the JOBS Act, which would remove the prohibition on general solicitation for certain private placement offerings.

The highlights from the proposed rules:

The current 506 exemption will remain in place, and 506(c) will provide for the new rule, which lifts the ban on general solicitation. The SEC is proposing a flexible “facts and circumstances” test to determine whether offerors took reasonable steps to verify the accredited status of an investor. Form D will be amended to include a check box for 506(c) offerings, enabling the Commission to track the quantity of 506(c) offerings being made. Almost all of the...

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Corporate Finance & Securities

SEC Issues Title II JOBS Act Proposed Rule

The SEC just finished its open meeting to consider a proposed rule, which the Commission passed with a 4-1 vote. To be clear, the SEC only approved proposing the rule. Here are the main takeaways from the proposal:

The current 506 exemption will remain in place, and 506(c) will provide for the new rule, which lifts the ban on general solicitation. The SEC is proposing a flexible “facts and circumstances” test to determine whether offerors took reasonable steps to verify the accredited status of an investor. Form D will be amended to include a check box for 506(c) offerings, enabling the Commission to track the quantity of 506(c) offerings being made. Almost all of the “protective provisions” suggested by commenters are absent from the proposed...

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Business Startup

iVLG News Roundup Week 34: Securities Regulation; Mergers & Acquisitions; Intellectual Property; etc.

Securities Laws

SEC Pushes Back Proposed JOBS Act Rules, Again Last week we wrote about how the SEC was opting to issue proposed rules for Title II of the JOBS Act at its August 22nd meeting, rather than implementing interim rules, as had been anticipated. But on August 21st, just a day before the proposed rules were set to be unveiled, the SEC issued a notice that the rules would not be proposed until August 29th. We’ll update update our blog with details on the proposed rules when they are announced. You can check out this post we wrote in July to get a refresher on the expected subjects of rulings by the SEC on Title II.

Mergers & Acquisitions

IBM Acquires Kenexa IBM has...

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Business Startup

iVLG Blog News Roundup Week 33: Securities Laws; Insider Trading; Mergers & Acquisitions; etc.

Securities Law

SEC Further Delays Ruling on Title II of JOBS Act The SEC Chairman Mary Schapiro has informed members of Congress that the SEC will delay implementing rules that would give effect to Title II of the JOBS Act, which will remove the general solicitiation ban of securities offered under Rule 506. The Wall Street Journal is reporting that the coming changes to Rule 506, which were thought to be taking effect as early as August 22nd, will not take effect until this fall at the earliest. Rather than implementing interim rules, the SEC will submit proposed rules and solicit comments on the proposed rules. Representative Patrick McHenry wrote a letter to Chairman Schapiro relating his frustration that implementation of the...

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Corporate Finance & Securities

NASAA JOBS Act Comment Letter: Suggestions for New Rule 506

Last week Jack Herstein, president of NASAA wrote a comment letter to the SEC on rulemakings under Titles II, III, and IV of the JOBS Act. The comments related to Title II, which authorizes general solicitation under Rule 506 of Regulation D, are particularly interesting since the Title II rules may be implemented as early as August (the rules were supposed to be enacted by July 4, but that was a fairly unrealistic timeline that Congress set).

NASAA’s Suggestions for Title II Rulemaking

NASAA separated its Title II suggestions into four categories: verification requirements, regulation of platforms, filing requirements, and deceptive advertising.

Verification Requirements Background: The current 506 regulations require issuers to “reasonably believe” that the investors satisfy the requirements to be an accredited...

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Business Startup

News Roundup 2012 Week 17: CROWDFUND Act, Terms of Use, & CISPA

CROWDFUND Act

SEC Reiterates: Crowdfunding Not Legal Yet The SEC issued an official comment emphasizing that crowdfunding is not yet legal. The JOBS Act has passed, and it makes crowdfunding legal, but not until the SEC issues a number of rules proscribed by the legislation. Congress wrote into the bill that the SEC had 270 days to promulgate these proscribed rules. The SEC’s statement reads:

“On April 5, 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law. The Act requires the Commission to adopt rules to implement a new exemption that will allow crowdfunding. Until then, we are reminding issuers that any offers or sales of securities purporting to rely on the crowdfunding exemption would be unlawful under the federal...

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