Crowdcheck 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…

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…

By this point everyone knows that the financial statements you must provide to the SEC in Tier 2 Regulation A offerings must be audited by a CPA. We are seeing reputable CPAs offer their services at very reasonable prices for early-stage companies. But companies need to know exactly what is covered in their agreement with the CPAs. Does your contract with the CPA include responding to SEC comments on financial statements? The SEC review process involves both lawyers and accountants commenting on your filings, and you have to respond to those comments to the SEC's satisfaction. You may also have to restate your financial statements, ie change them and get a new…

Just over two weeks to go to revised Regulation A going into effect (setting aside the litigation) and time for another blog post. This time I'm looking at what an Offering Circular (the prospectus-like document that makes the offer of securities) is going to look like. You're going to be disappointed. It's going to be dull. I would say "very dull" but the SEC sometimes has a problem with adjectives. I know that the online alternative investment market that relies on Rule 506 of Regulation D under the Securities Act has been experimenting with many different types of disclosure. Videos! Pitch decks! PPMs with pictures of attractive people using the issuer's…

Three weeks to go to effectiveness of new Regulation A (we'll ignore the litigation for the moment), and time for a new topic: "testing the waters" (TTW). One of the great things about Reg A is the ability to find out, at low cost, whether it's worth hiring lawyers and accountants to prepare the filing with the SEC. You can use social media to find your crowd and ask them whether they want to invest, and in what amounts, and what kind of security they would be most interested in. But (and there's always a "but" in securities law, right?) there are some requirements you need to meet, both at the time you publish your TTW materials, and later. First, there is…

...for "filing a federal lawsuit" that is. On the Friday before the long weekend, William Galvin of Massachusetts filed in the US Appeals Court for the District of Columbia asking for an injunction against Reg A+ going into effect on June 19. Watch this space for developments. Update [1 pm Tuesday] . . . Montana is also filing a suit, accordingly to comments made by Mr. Galvin. But we haven't found that filing yet. Update [1 pm Thursday] . . . The Montana suit (which is consolidated with the Massachussetts suit) threatens that they will seek a stay (asking the court to prevent Reg A going into effect). See if I ski in Big Sky ever again!

Just over four weeks to go to effectiveness of new Regulation A, and time for another post on Reg A+ topics. This time I'd like to discuss Tier 1 financial statements. I've seen some chatter to the effect that while financial statements for Tier 2 offerings must be audited, Tier 1 financials must be reviewed by a CPA. Actually, not so. The SEC's rules just say "need not be audited." No review required. But don't start cheering yet. The absence of the audit requirement may make Tier 1 look like a more attractive option for companies raising a smaller amount of money and only intending to target investors in one state. But it's not going to be as easy as it…

Five weeks to effectiveness of the changes to the SEC's Regulation A, popularly known as A+, and we are starting a series of blog posts about getting ready to use Regulation A. And the first topic is one we haven't seen very much chatter about: the need to file "material contracts" with the SEC as part of the filing of the Offering Statement. Here's the rule: a "material contract" is one that is made "other than in the ordinary course of business that is material to the issuer". Simply put, that means a contract that isn't run of the mill and that is important to your business. So it doesn't include your contract for internet service but it does include things…

We blogged about Section 17(b) compliance some months ago. Since then some friends in the market have asked what we would recommend as best practices, and although, as always, this isn’t legal advice, here’s a useful starting point to develop your own best practices.

Everybody’s buzzing about the fact that on Wednesday the SEC is going to adopt changes to Regulation A, finalizing the changes to Reg A that were mandated by the JOBS Act and first proposed by the SEC in December 2013. Assuming that the SEC makes the right call on state preemption (ie, votes to have Regulation A+ offerings reviewed only by the SEC and not by the states), this will make it possible for start-up companies to make offerings of securities publicly to all sorts of investors, with offering sizes up to $50 million. Is this crowdfunding? Yes and no. Why Reg A+ offerings look like crowdfunding: You can sell securities over the internet To lots of…