Corporate Finance & Securities

Helpful Guide for General Solicitation and Start-up Fundraising

Joe Wallin, editor at Startup Law Blog, recently collaborated with Lauren Hakala, editor at Practical Law Company, on a guide that discusses the law, guidance and open questions on what activities constitute general solicitation or advertising in the context of transactions relying on the Rule 506 safe harbor from Securities Act registration. For those interested in learning more about the changing landscape of startup capital raising, you should check out this guide.

Specifically, the guide provides information about:

Implications of Using General Solicitation Public Website, Social Media and Print or Broadcast Mentions of Offerings Online Funding Platforms Product Advertising and Business Announcements Demo Days, Pitch Events and Other Meet-Ups

Check out the full article here.

...

Read More

Corporate Finance & Securities

Understanding Private Funds — 3(c)(1) Funds

Investment companies–sometimes called private funds, pooled funds, or hedge funds–are regulated by both federal and state governments. In today’s post, I’ll discuss some of the federal regulations. In particular, I’ll discuss the Investment Company Act, why fund managers want to avoid running afoul of the Act, and  3(c)(1) funds (which are exempt from large portions of the regulations imposed by the Act).

The Investment Company Act of 1940 Investment companies operating in the United States are subject to the regulations contained in the Investment Company Act of 1940. An investment company is defined as a company that “is or holds itself out as being engaged primarily or proposes to engage primarily, in the business of investing, reinvesting or trading securities.”

A...

Read More

Corporate Finance & Securities

Early Numbers Show that Companies are Using Rule 506(c) to Raise Funds

If you are as curious as we are about the consequences of the new Rule 506(c), I’ve got some good news for you. There’s some early data that points to how issuers are taking advantage of the recent SEC rule changes.

Keith Higgins, the newly appointed director of the SEC’s Division of Corporate Finance, recently commented on the preliminary effects Rule 506(c) on the investment landscape. For those of you that have been following the JOBS Act and its various moving parts, you are well aware of Rule 506(c) and the fact that the SEC lifted the ban on general solicitation for securities offerings. For the rest of you, here’s a primer on Rule 506(c) and the lifting of the ban...

Read More

Corporate Finance & Securities

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

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

Corporate Finance & Securities

Joint Net Worth Standard for Accredited Investor Verification

Only accredited investors can participate in private placements offered pursuant to the new Rule 506(c) which allows founders to utilize advertisements to solicit investment their company. A potential investor and his or her spouse qualify as accredited investors as defined in Rule 501 of Regulation D if their joint net worth exceeds one million dollars.

The text of the rule states the following individuals qualify as accredited investors:

“Any natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000.”

On the face of it, the language is a bit ambiguous. Does “joint net worth” mean community property–assets that are jointly owned? Or does it mean that the wealth of both spouses can be aggregated for determining whether the...

Read More

Corporate Finance & Securities

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

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...

Read More

Corporate Finance & Securities

Raising Capital in Washington State: Part 2

Last week we provided an overview of raising capital in Washington State. Today, we are going to dive into one exemption provided for by Federal and State law under which a company can raise money.

The Small Offering Exemption (SOE) provided for in WAC 460-44A-504, allows you to raise up to $1,000,000 regardless of the location of investors. Additionally, this type of offering requires:

1)      The offering cannot be sold to more than 20 non-accredited investors within Washington;

2)      You can sell to an unlimited number of accredited investors and investors residing outside the State of Washington (subject to the $1,000,000 offering limit);

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...

Read More

Corporate Finance & Securities

When are FINRA Members Subject to the Arbitration Provisions of FINRA’s Customer Code?

The United States Court of Appeals for the Fourth Circuit has issued a trio of opinions in 2013 which determine the scope of FINRA’s customer code. The customer code allows customers of FINRA members to initiate arbitration proceedings against a FINRA member.

Background FINRA is a private self-regulatory organization that has the authority to exercise comprehensive oversight over all securities firms that do business with the public.

FINRA’s Customer Code governs arbitration between customers of FINRA members and FINRA members. (There is also an Industry Code which governs disputes between FINRA members.)

Rule 12200 provides that parties must arbitrate a dispute under the Customer Code if: (1) Arbitration under the Code is either: (a) required by a written agreement, or (b) requested by the customer; (2) the dispute is...

Read More

Litigation & Dispute Resolution

Recent Changes to Whistleblower Protections under Dodd-Frank

Recent cases have triggered a growing discussion about the whistleblower protections under the Dodd-Frank Act. Most believe that the regulations under Dodd-Frank are here to stay (at least another four years) now that President Obama has been reelected. With new regulations comes new judicial interpretations of the regulations. These judicial interpretations often broaden or narrow the scope of the regulation and can have profound impacts depending on the nature of the interpretation. In today’s post, we’ve highlighted the general characteristics of the two major whistleblower protections under Dodd-Frank and how recent cases have expanded these protections.

The Bounty Program Under Dodd-Frank, whistleblower’s can receive cash for sharing information with the SEC or Commodity Futures Trading Commission concerning any misconduct that falls under...

Read More

Litigation & Dispute Resolution

Apple CEO Dismisses Lawsuit as “Silly Slideshow”

Last week we wrote about Greenlight Capital’s lawsuit against Apple Inc. The hedge fund manager David Einhorn filed the lawsuit to contest Apple’s proposition to eliminate the board’s ability to issue preferred shares without shareholder approval. Today, Apple CEO Tim Cook called the lawsuit a “silly slideshow” while speaking at a Goldman Sachs investor conference.

Cook noted that the disagreement between Einhorn and Apple stems from a proposal on Apple’s proxy statement which it filed with the SEC in December. The crux of the dispute centers around how to issue preferred stock and who is able to approve new shares. The proposals in the proxy statement come as part of Cook’s plan to improve the corporate governance of Apple.

Cook stated, “So...

Read More

146 N Canal Street, Suite 350   |   team@invigorlaw.com