News Roundup 2012 Week 16: Securities Law, Corporate Governance, JOBS Act, Corporate Finance, Etc.

Securities Transactions & Corporate Governance

Google Stock Split Preserves Founder Control Google’s stock split that was announced last Friday created a new class of non-voting stock. Google’s stock structure provides for 66% of the voting power to be concentrated in the hands of three individuals: the company’s two co-founders, Larry Page and Sergey Brin, and the Executive Chairman, Eric Schmidt. By creating the class of non-voting stock, and distributing this stock in the stock split, the controlling shareholders will avoid having their voting rights diluted. Other web companies such as Zynga, Facebook, and Groupon have implemented a similar stock structure, which allows for visionary company leaders to maintain company control. The drawback is that others, including investors and employees, have relatively fewer votes....

— Kyle Hulten

Corporate Finance & Securities

Crowdfunding: Critcisms and Defenses

With the recent discussion surrounding the JOBS Act and crowdfunding, we thought it was a good time to discuss some of the criticisms surrounding crowdfunding, as well as reasons why some of the criticism may be lacking legitimacy.

Loosening regulations opens the door to reckless investing and scam artists Much of the criticism over the passing of the JOBS Act stems from the fear that loosening investment regulations is an invitation for get-rich-quick scam artists to take advantage of a larger pool of investors via the Internet. Economist Robert Reich argues that crowdfunding is just a means by which people whose net worth is less than $100,000 can “gamble away” up to 5 percent of their annual incomes. Another critic, Jack Hernstein,...

— Gavin Johnson

Business Startup

News Roundup Week 15: Crowdfunding & the SEC, Copyright & the DMCA, Mergers & Acquisitions, etc.

CROWDFUND Act & Securities Law

SEC Seeks Feedback On JOBS Act The SEC announced on Wednesday that it is seeking feedback on the changes that will be forthcoming under the JOBS Act. The JOBS Act makes it easier for companies, smaller companies in particular, to raise money through the sale of equity. In the JOBS Act, Congress left much of the heavy lifting to the SEC. For example, the portion of the bill that requires crowd funding websites to protect consumers states “intermediareies shall take such measures to reduce the risk of fraud with respect to such transactions, as established by the Commission (the SEC), by Rule.” Because important aspects of this bill have been left to the SEC, it will be...

— Kyle Hulten

Business Startup

News Roundup 2012 Week 14: Crowdfunding, Privacy Policies, Regional News, etc.

JOBS Act – Securities Law

Obama Signs JOBS Act Yesterday Obama signed the JOBS Act into law. The President called the JOBS Act, “potential game changer” for small businesses. The JOBS Act eases federal regulation on the sales of securities, making it easier for companies to raise capital. Part of the JOBS Act is the CROWDFUND Act which enables companies to raise money by selling stock online.

Privacy Policies & Mobile Technology

Phone Companies Cashing in on Tracking Capabilities According to a New York Times article this week, cell phone companies are profiting from the sales of tracking data to law enforcement agencies. While warrants are required for phone taps, and data logs, police have been able to acquire tracking data without warrants. When AT&T...

— Kyle Hulten

Corporate Finance & Securities

Crowdfunding: The CROWDFUND Act in Plain English

Part of the JOBS Act that just passed Congress is the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012” or the “CROWDFUND Act,” which enables businesses to sell stock online through intermediaries.

Unless an exemption applies, businesses need to file a registration statement with the SEC before they can publicly solicit the sales of stock. The CROWDFUND Act creates a new class of transactions that are exempted from the requirement of filing a registration statement. (Filing a registration statement typically costs millions, takes months to complete, and subjects a company to ongoing reporting requirements.)

The CROWDFUND Act excludes transactions from the registration requirement provided that:

1. Issuers do not raise more than $1,000,000 from the sale of securities during...

— Kyle Hulten

Business Startup

News Roundup Week 13: The JOBS Bill, Securities Law, Employment Law, Social Media Law, etc.

The JOBS Bill & Securities Laws

Senate and House Approve Major Overhauls of Federal Securities Law This week the house and senate JOBS bills were reconciled and H.R. 3606 was sent to the president to be signed into law. The White House has publicly supported the bill, and is expected to sign the bill soon. The 22 page bill has seven different titles, each of which is intended to make it easier for companies to raise money.

Title I “Reopening American Capital Markets to Emerging Growth Companies” creates reduced reporting obligations for “emerging growth companies,” a newly defined classification of businesses. These reduced filing and reporting obligations mean that only the largest companies will have to fully comply with the burdensome filing and...

— Kyle Hulten

Business Startup

News Roundup 2012 Week 12: Corporate Finance, Int’l Trade & Clean Energy, Corporate Governance, Social Media & Employment Law

Corporate Finance & Securities Regulation

Senate JOBS Act Passes Key Hurdle Today the Senate voted 76-22 to pass a cloture motion (a motion to end debate) on the JOBS (Jumpstart Our Business Startups) Act. This controversial legislation would enable businesses to raise money through crowdfunding, and would reduce other restrictions on raising capital. The Wall Street Journal, and the Chicago Tribune support the JOBS Act, but others including the New York Times and the Securities Exchange Commission have spoken against the bill. One the one hand, the Journal and the Tribune are taking the position that the bill should be passed because it will boost the economy, and on the other, the Times and the SEC are concerned that without appropriate regulation the...

— Kyle Hulten