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February 13, 2017 by Andrew Stephenson
So far, Regulation Crowdfunding appears to be doing what it was always intended to do. Small businesses are able to raise funds to begin or expand their business operations. Some companies could be categorized as innovative growth companies, others more main street. In any case, a common theme is that issuers are in need of cash and see crowdfunding as a method that provides additional benefits over traditional loans or angel investment – if those options were even available to the issuer to begin with. As offerings under Regulation Crowdfunding can take a few months, often with substantial upfront costs, many issuers find themselves in the position of needing...
This entry is filed under Crowdfunding, SEC, Section 4(a)(6), Securities Law, Blog
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November 16, 2016 by Andrew Stephenson
Funding portals are governed by unique communication rules under Regulation CF and FINRA’s Funding Portal Rules. These rules derive from the restrictions on funding portals regarding soliciting investors and providing investment advice. Additional information can be found in the memo here. 
This entry is filed under Crowdfunding, FINRA, SEC, Section 4(a)(6), Securities Law, Blog
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November 09, 2016 by Andrew Stephenson
Just as with issuer compliance, investment platform compliance with Regulation CF has been all over the map since Regulation CF went into effect in May. Under Rules 300 to 305 of Regulation CF, all intermediaries in Regulation CF offerings have specific requirements that they must meet. For instance, they must register with the SEC and FINRA, take measures to reduce the risk of fraud in transactions, provide educational materials to investors, and comply with process requirements for each offering. It is in the processes for each offering, Rule 303, that we see the most variation in compliance. In particular, under Rule 303, all platforms are required to make...
This entry is filed under Crowdfunding, Disclosure, FINRA, SEC, Blog
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October 06, 2016 by Andrew Hanks
CrowdCheck CEO Sara Hanks was quoted in The Hill's covereage of the recent SEC Advisory Committee on Small and Emerging Companies meeting. Sara Hanks is the Co-Chair of ACSEC. http://bit.ly/2dV8c4V
This entry is filed under Crowdfunding, In The News, SEC, Blog
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September 28, 2016 by Andrew Stephenson
On September 16, 2016, the SEC filed its first suspension of the Regulation A exemption against an issuer for failure to file its required annual statement. A suspension of the Regulation A exemption is a Bad Act, disqualifying the company from raising capital under Regulation A, Regulation CF, and Rule 506 of Regulation D. The order notes that under Rule 257 of Regulation A, issuers whose offering statements have been qualified under Tier 2 must file annual reports on Form 1-K for the fiscal year in which the offering statement became qualified and for any fiscal year thereafter. This requirement continues until the issuer meets the requirements to no longer...
This entry is filed under Bad Actor, Disclosure, Regulation A, SEC, Securities Law, Blog
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September 22, 2016 by Andrew Stephenson
While never intended to be the type of discussion that accompanies the management’s discussion and analysis of a registered securities offering, the SEC expects issuers making offerings under Regulation CF to discuss all the material information regarding their current liquidity and capital resources. Under Rule 201(s), this discussion must cover each period for which the issuer has provided financial statements as well as identification of any material changes that have occurred after the end of the periods covered by the financial statements. In practice, the discussion would include items like cash on hand, burn rate, and availability of other sources of...
This entry is filed under Crowdfunding, Disclosure, SEC, Section 4(a)(6), Blog
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September 18, 2016 by Sara Hanks
  We live in a world without borders. Securities laws, however, have clearly-defined jurisdictional limits, many of them inconsistent across countries. We live in a world where information wants to be free. Securities laws, however, have very clear ideas about how where information is allowed to go and who is responsible for it. This is all becoming evident in the area of securities crowdfunding. I’ve come across a couple of issues recently which underline the need for a clear, comprehensible, cross-jurisdictional agreement as to whose laws will apply to what transactions and when people should be allowed to invest in an offering being made in another country....
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September 12, 2016 by Andrew Stephenson
The financial statements and corresponding discussion of financial condition of an issuer undertaking a securities offering under Regulation CF is arguably the most important set of information for an investor to make an informed investment decision. While the story of the company is critical for gaining investor interest, it is the financials that help an investor understand the potential for financial return. The financial statements and discussion are required disclosures under Rule 201 of Regulation CF. However, according to CrowdCheck’s research, approximately 35% of Regulation CF issuers are conducting, or have conducted, offerings with non-compliant...
This entry is filed under Crowdfunding, Disclosure, SEC, Securities Law, Blog
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June 08, 2016 by Andrew Stephenson
After extensive time spent reviewing the communication rules under Regulation CF and their interplay with other securities laws, as well as consulting with the SEC, CrowdCheck has released its comprehensive memo on communications and publicity by issuers prior to and during a Regulation CF offering.  The communication rules for Regulation CF differ substantially from corresponding communication rules for offerings under Regulation A and Rule 506(c) of Regulation D, and from IPOs. We hope this memo will bring some clarity to the communications rules for platforms and issuers.
This entry is filed under Crowdfunding, SEC, Section 4(a)(6), Securities Law, Blog
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May 23, 2016 by Andrew Stephenson
As we have previously discussed, the Regulation CF disclosure requirement for the financial condition of the issuer has the potential to get inexperienced companies in trouble. It is in this section of the disclosure that optimistic entrepreneurs may provide misleading information by not providing the full details of performance measurements, or by not including information on the assumptions underlying any financial projections. Such statements may be misleading in their own right, or may omit information necessary to make the provided information not misleading – also known as securities fraud (see paragraph (c)). As we have also previously discussed,...
This entry is filed under Crowdfunding, Disclosure, Fraud, Offering materials, SEC, Blog
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