Crowdcheck Blog
Insights and information for online capital formation
Lawyers and finance peeps who practiced around the turn of the millennium will recall many of the issues that were raised by the misbehavior of investment banks’ research departments. I-bank analysts would take company executives golfing and, somewhere round the fourth hole, would ask “So, Executive, how is the distribution channel for the next quarter looking? If I said four thousand units a month, would I be off-base?” If the executive gave any answer other than “No comment and is that your ball in the sand?” then the company could be held to have “entangled” itself in the research report that resulted, and be responsible for any misleading statements in it.[…
This entry is filed under Capital Raising, Crowdfunding, Disclosure, Disclosure, Liability, Regulation A, Section 4(a)(6), Securities Law
This isn’t specifically commentary on crowdfunding, but some thoughts on some of the issues that the broader economy is facing. I was pleased to see this article in the NYT highlighting the challenges parents are facing. Parents and people who work with parents (and that’s pretty much everyone in the working world) do not care so much about whether the bars are open, or whether they can get their nails done as what to do with the %&**&!! kids.
In general, the move to online working from home has been comparatively easy on CrowdCheck. We have always been a distributed workforce (I have employees I’ve never actually met in person) and we’ve been able to…
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While Regulation A and Regulation CF have been effective tools for early stage companies to raise funds from investors across the country, secondary trading in those securities can often be a challenge, in part due to state-by-state securities regulations – often referred to as “Blue Sky” laws – that restrict which stocks brokers can discuss with their retail clients. This applies even to securities traded on new “alternative trading systems” or ATSs. To help companies meet these Blue Sky requirements and reach a potentially larger group of investors, CrowdCheck has launched TradeCheck, which includes a partnership with the Mergent Manual to allow private…
This entry is filed under Capital Raising, Crowdfunding, Regulation A, Section 4(a)(6), Securities Law, State Law
This is the third in a series of blog posts on the topic of the SEC’s proposed changes to the exempt offering matrix.
Below are earlier posts:
SEC exempt offerings: process
SEC exempt offerings proposal: no relief from offering circular delivery requirements
Well, CrowdCheck finally got our comment letter on the proposals filed. It took the SEC a while to post it; was it the Monty Python reference or the “Mean Girls” quote that threw them off, I wonder?
There are a lot of things to like in the proposals and some things that we found problematic or too complicated. If our comment letter is too long (it’s only 31 pages), here are the highlights:
While our…
This entry is filed under Capital Raising, Crowdfunding, Crowdfunding Conditions, Disclosure, Disclosure, Federal Law, Regulation, Regulation A, Rule 506(c), Section 4(a)(6), Securities Law
This is the second in a series of blog posts on the topic of the SEC’s proposed changes to the exempt offering matrix. Below is a link to the first post:
SEC exempt offerings: process
Oh, SEC, how you tease. Back in June 2019, the Concept Release on exempt offerings discussed the Regulation A offering circular (OC) delivery requirements that we flagged as problematic some time ago. (The rules require that, after qualification, written offers -- this includes radio and TV -- must be “accompanied or preceded by” the OC. This is not something you can do on TV or radio, or, for that matter, in tombstone ads in the WSJ.) The discussion in the text of the Concept…
This entry is filed under Capital Raising, Crowdfunding Conditions, Disclosure, Offering materials, Regulation, Regulation A, SEC, Securities Law
This will be the first in a series of blog posts on the topic of the SEC’s proposed changes to the exempt offering matrix. This first one is (mostly) about process.
The SEC has proposed changes to its rules for exempt offerings. The rules would change aspects of Regulations A, CF and D and the way they all work together. We’ll be getting into the details over the course of the next few weeks, but we wanted to mention a few things before diving in.
First, these are PROPOSED rules. They are not going into effect for a while (see timing below). They might never go into effect. They might just sit on a shelf gathering dust. They might get changed and reproposed.…
This entry is filed under Crowdfunding Conditions, Federal Law, Regulation, Regulation A, Rule 506(b), Rule 506(c), SEC, Section 4(a)(6), Securities Law
One aspect of Regulation A that does not seem to be getting the attention it should is the fact that it facilitates investment into things other than the future performance of early-stage companies. Real estate is an obvious alternative to early-stage equity. Even where the real estate project has not been built out yet, real estate investments (which may be REITs or other real estate funds) promise investments that have an earlier time horizon, in some cases more liquidity and in many cases generate cashflow in real time. There have been scored of successful real estate offerings under Regulation A.
A completely different category of offerings that is taking…
This entry is filed under Capital Raising, Federal Law, Regulation A, Securities Law, Types of Offerings
I love it when SEC Commissioners quote (arguably even cite in support) the Boss.
This is Hester Peirce, aka CryptoMom, proposing a safe harbor for crypto entrepreneurs who are developing tokens on networks yet to be built. She summarizes the problem thus:
Many crypto entrepreneurs are seeking to build decentralized networks in which a token serves as a means of exchange on, or provides access to a function of the network. In the course of building out the network, they need to get the tokens into the hands of other people. But these efforts can be stymied by concerns that such efforts may fall within the ambit of federal securities laws. The fear of running…
This entry is filed under Capital Raising, ICO, SEC, Securities Law
We’ve had this question come up a couple of times in recent deals, so it’s worth flagging. Under Regulation A, you can have offering statements in effect (and thus offerings open) for more than a year (they can even last three years under certain circumstances). However, if your continuous offering is going to last more than a year, at least once a year you have to file a post-qualification amendment (PQA) to “refresh” the offering statement. This is required by Rule 252(f)(2)(i), which says:
Post-qualification amendments must be filed in the following circumstances for ongoing offerings:
(i) At least every 12 months after the qualification date to include the…
This entry is filed under Capital Raising, Disclosure, Federal Law, Financial Statements, Regulation, Regulation A
The SEC has proposed amending the definition of “accredited investors.” Accredited investors are currently defined as (huge generalization here) people who have net worth of $1 million (excluding principal residence) or income of $200,000 ($300,000 with spouse) or entities that have assets of $5 million. Here’s the full definition.
The whole point of the accreditation definition was that it was it was supposed to be a way to determine whether someone was able to “fend for themself” in making investment decisions, such that they didn’t need the protection that SEC registration provides. Those people may invest in private placements. The thinking at the time the…
This entry is filed under Capital Raising, Offerings: Traditional Regulation D, Regulation, Rule 506(b), Rule 506(c), SEC, Securities Law