Corporate Finance & Securities

The SAFE: Y Combinator’s New Security Seeks to Improve on Traditional Startup Financing Instruments

Y Combinator, a previous proponent of convertible debt, has unveiled a new type of investment security – the “simple agreement for future equity.” Or, as they’re abbreviating it, the SAFE. (I wouldn’t have advised calling it “SAFE,” as an investment in a startup is inherently risky. Despite the name, most investors should understand that just because it’s called SAFE does not make it a safe investment.)


Security instruments are contracts by which companies exchange an interest in the company for consideration–usually cash used to finance the company. The SAFE is a contract that has some different features from traditional security instruments. To understand the SAFE, it’s helpful to have a grasp of the more traditional security instruments.


Read More

Corporate Finance & Securities

SBA Offers Entrepreneurs an Intro to Crowdfunding Course

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

Corporate Finance & Securities

From Fan to Shareholder: Buy Shares in Your Favorite Athlete

The leaves are beginning to turn beautiful fall colors. The temperature is beginning to dip below 40 degrees. And football season is in full swing. I am as guilty as the rest of you spending countless hours on Saturdays and Sundays watching football, updating my fantasy football scoreboard, and rooting on my favorite team (Go Hawks!) and athletes. Soon you can root for your favorite athlete in a whole new way, as a shareholder in that athlete’s future financial performance.

Fantex Holdings Looks to Expand the Possibilities Yesterday, Fantex Holdings—a start-up company offering the first registered trading platform that lets you buy and sell stock linked to the value and performance of a pro athlete—announced its new trading exchange for investors. The...

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

Corporate Finance & Securities

Drafting Disclosure Documents to Protect Against Material Omissions in Securities Offerings

Happy Halloween to all our readers!

Earlier this month, we wrote about the dangers of material omissions in private placement offerings. Basically, if you’re selling stock in your company, you need to disclose all information necessary for an investor to make an informed decision. For example, if you forget to mention that your company is about to lose half its customer base, your investors can sue for rescission, allowing them to get all their money back plus interest.

How do you make sure that you don’t forget to disclose important information to your investors? Well, the short answer is, your best option is to hire a lawyer. Disclosures need to be tailored for each industry and each company. There is no magic set...

Read More

Business Startup

Should I spin off a division of my business to form a separate company?: Legal issues to consider.

There may be a time in your career as a business owner or entrepreneur when you consider a corporate spin off or other business divestiture (also known as a “divesture” ). The legal, accounting, and other business issues surrounding such a transaction can be complex. However, every business owner will likely need to address the following issues when considering “spinning off” a part of the business to form a separate company, and addressing these issues before making your decision will undoubtedly save you time and money:

1. Why should I “spin off” a division of my company to form a subsidiary?

There are a number of reasons a spin off may be beneficial to your organization. A few common reasons that may...

Read More

146 N Canal Street, Suite 350   |