Crowdcheck Blog

One seemingly critical difference between conducting a Regulation A offering under Tier 1 or Tier 2 at the federal level is the requirement to provide audited financial statements. The SEC does not require audited financial statements for Tier 1 offering, whereas audited financial statements are required for Tier 2. However, this difference is merely a red herring. Nearly every Tier 1 offering will require audited financial statements, because it is likely that at least one state in which the issuer intends to offer its securities requires audited financial statements. In our review of the statutory and administrative rulings of state securities regulators, 27…

View our comment letter: https://www.sec.gov/comments/s7-22-15/s72215-9.pdf View the proposals: http://www.sec.gov/rules/proposed/2015/33-9973.pdf  

Regulation A is a public offering of securities. Even though it is not a full blown IPO, it still takes a substantial amount of time to prepare and to have a successful offering. At CrowdCheck, we have been approached by a handful of companies that are excited about Regulation A and want to start selling to investors in a month. That’s great we say. We then ask, have you engaged an accountant? No. Do you know what you want to offer investors? No. Have you converted from an LLC to a C Corporation? No. You get the idea. A typical timeline for a Regulation A offering requires about two months of lead time. During that time, your accountants and lawyers can work…

Written by CrowdCheck CEO Sara Hanks and published in Bloomberg BNA Securities Regulation & Law Report. http://bit.ly/1TAjN3d

OK, that has GOT to be the most boring title for one of the most exciting developments in the securities markets, right? I've mentioned before that the SEC is taking a "free market disclosure" approach to Regulation A. In contrast to what happens in the context of an IPO, where you can only make very limited communications outside the prospectus, in Regulation A you can make "testing the waters" communications up to the time the SEC qualifies your offering. Additionally, you can market to prospective investors after qualification, and we are seeing a lot of this type of activity right now. As we know, "securities are sold and not bought" and traditionally the "…

CrowdCheck has put together its definitive summary of Regulation Crowdfunding as adopted by the SEC. The memo can be found here, http://bit.ly/1XE8c44

Here's hoping that everyone in the crowdfunding community is planning to respond to the SEC's proposals on Rule 147 and 504. Even if they think the SEC got it right. And that they will comment on all aspects of the proposals, even the bits that the SEC got right. Here's why. Let's say the SEC proposes a rule that says companies must disclose whether pets are permitted at the company's offices. Let's imagine nearly everyone thinks "Well, that's reasonable. I want to know how pup-friendly a company is." They don't comment because they assume the SEC will adopt the rules as proposed. But in the proposing release the SEC has asked whether this disclosure is…

Actually, the SEC has no views specifically on singing kittens that I know of (although I am aware of at least one SEC staffer smuggling a cat into the building). The issue arises, though, in the context of "notices" of offerings under the new crowdfunding rules. As you probably know, the provisions of the JOBS Act limit the extent to which a company issuing securities can advertise the terms of the offering anywhere other than on the website of the broker-dealer or funding portal hosting the offering. The SEC's rules clarify what is permitted in these notices. The issuer can post a brief notice including information about the company and what it does and…

This is my least favorite bit of the SEC's Regulation CF: the fact that the exemption from Section 12(g) is conditional. What does this mean? Section 12(g) of the Securities Exchange Act of 1934 says that if you acquire a certain number of shareholders of any class of equity securities, you have to register that class with the SEC and become subject to the SEC's ongoing reporting requirements. The shareholder number for non-accredited investors is 500. Lots of crowdfunding companies will want to have at least 500 investors in their crowd. Regulation CF exempts crowdfunding companies from full SEC registration, BUT this exemption is conditioned on the companies…

I had a few spare minutes yesterday after making our fifth Regulation A filing with the SEC and after a quick scamper round the internet I found that there is an amazing amount of bad information about Regulation A out there. It's getting so deep we are going to have to start shovelling. So I'm going to start picking on bits of misinformation and shovelling them out. We'll start with this one: "Non-affiliates can sell their shares after one year under SEC Rule 144." Nope. Rule 144 has nothing to do with Regulation A. Rule 144 gives affiliates and people who are holding "restricted" securities a way to sell their securities without being treated as underwriters…