Crowdcheck Blog
Insights and information for online capital formation
Issuers of securities under Regulation CF will be required to provide financial statements prepared in accordance with US Generally Accepted Accounting Practices (U.S. GAAP) covering the two most recently completed fiscal years (or shorter period since inception). The type of review that these financial statements have to undergo depends on the amount sought, the amount of securities that the issuer has already sold in reliance on Regulation CF in the preceding 12 months, and whether the issuer has previously sold securities in an offering under Regulation CF:
· If current offer plus previous raises amounts to $100,000 or less, the financial…
This entry is filed under Crowdfunding, Disclosure, Section 4(a)(6), Securities Law, Blog
As we all know by now, the SEC on Friday voted in favor of adopting the regulations that will permit securities-based crowdfunding. The rules will go into full effect 180 days after publication in the Federal Register, which may mean just around May 1. Which seems like a very fine time for a fundamental change in the funding of early-stage companies.
We'll be blogging about various aspects of the new rules here. And we'll be producing a practical guide to Regulation Cf which we'll distribute to everyone and post in "Resources". So keep visiting!
And long live the financial revolution!
This entry is filed under Crowdfunding, Section 4(a)(6), Securities Law, Blog
We've discussed previously the fact that in a Regulation A offering the SEC gets to see all your stuff. Of course, it's not just the SEC who gets to see stuff, but anyone with an internet connection. And some of the stuff that they get to see in a Regulation A filing consists of your "material contracts." What are these? Well, they are described here, but basically they consist of contracts with management, such as employment agreements, stock option plans and important agreements such as supply or manufacturing contracts.
What if you have confidential information in those contracts that you don't want to share with the public? Or the contract has a…
This entry is filed under Crowdfunding, Disclosure, Regulation A, SEC, Securities Law, Blog
I had a great conversation with a member of the SEC Staff the other day in which he referred to the type of disclosure to be made under Regulation A as “free market disclosure.” I think that’s a great term and much better than the way I was thinking of disclosure under Regulation A, which was in terms of “non-application of the principle of ‘monopoly of the prospectus’.”
Oops, I see I almost lost you there. I was talking securities law geek language again.
The “monopoly of the prospectus” refers to the fact that, if you were doing a regular IPO, instead of a Reg A offering, you would not be able to make any statements about the offering outside the official…
This entry is filed under Crowdfunding, Disclosure, Regulation A, SEC, Blog
There’s an increasing amount of publicity out there from companies that are “testing the water” (TTW) before deciding to make a Regulation A offering. At CrowdCheck, we love the idea of TTW. It’s an efficient way of making sure that it’s going to be worth a company’s time to hire lawyers and accountants and go through the SEC review process.
But there are important basic SEC rules that haven’t changed at all, and you need to bear them in mind. First, know that anything that “conditions the market” or promotes interest in a capital-raise, is an “offer” of securities. That can include posting a TTW campaign on an online investment platform, an appearance on…
This entry is filed under Crowdfunding, Disclosure, Regulation A, SEC, Securities Law, Blog
Pretty much everyone knows by now that audited financial statements are required for offerings under Tier 2 of Regulation A. While the SEC doesn’t require audited financials (or any kind of review by outside accountants) for Tier 1, some states do require audited financials in Tier 1 offerings.
But do you know what the audit letter is supposed to look like? That is important.
Without getting too much into the weeds, the SEC requires that audit reports meet the requirements of Regulation S-X. And that means those audit reports must be “clean.” There can’t be any reservations or qualifications or limitations on scope on the audit. Here’s an example of the…
This entry is filed under Crowdfunding, Regulation A, SEC, Blog
Those of us keeping an eye on filings under revised Regulation A (“Regulation A+”) have noted that, as of today’s date, there have been six public filings and five of those have apparently been withdrawn. [Correction: they weren't withdrawn, they were required to be amended prior to review.] I don’t think the chances of the most recent one surviving are high, either.
What happened? Well, only the SEC Staff and the companies who made the filings know the truth, and several of the filings had more than one obvious issue, but here’s a thing they all had in common: No financial statements.
As all securities lawyers practicing before the SEC know, you do not…
This entry is filed under Crowdfunding, Disclosure, Failure, Regulation A, SEC, Securities Law, Blog
The Staff of the SEC's Division of Corporation Finance has posted some Compliance and Disclosure Interpretations ("CD&Is") here (scroll down to Section 182). Nothing surprising, but some useful stuff there. Possibly the most important interp is the one relating to Twitter (Q 182.09), which says if you can't fit the disclosure required by Rule 255 into a Tweet, you can link to that language, but if you can fit the required disclosure into an electronic communication, then you must; linking isn't enough.
This entry is filed under Crowdfunding, Disclosure, Regulation A, SEC, Blog
Good lord, there is a lot of nonsense being written about revised Regulation A, which went into effect this morning.
People are saying the SEC has opened up investment to a whole new class of investors and companies. People are saying that companies were never able to publicly solicit from non-accredited investors before. People are saying that now you don’t have to know your investors personally, like you did before.
Folks, most of this is sheer nonsense. Regulation A has been around since 1936. Under Regulation A you have always been able to make public offers to non-accredited investors. Under Regulation A you’ve also been able to “test the waters”, that is…
This entry is filed under Regulation A, SEC, Blog
Less than a week to go before the revisions to Regulation A go into effect and many companies are making plans to make an offering. It's not too late to back out, though!
It may seem odd that I'm saying this as both I personally and CrowdCheck as a company are very much in favor of Regulation A. But companies need to know that they may be making a long-term commitment to ongoing SEC disclosure requirements, and be comfortable with that.
You're probably aware of the Regulation A ongoing disclosure requirements, which requires annual and semi-annual filings. The required disclosure is not too different from initial filings.
But you have to bear in mind that at…
This entry is filed under Crowdfunding, Disclosure, Regulation A, SEC, Securities Law, Blog