Crowdcheck Blog
Insights and information for online capital formation
While Section 4(a)(6) of the Securities Act and Reg CF preempt state regulation of offerings under Reg CF, states are still permitted to require notice filings be made. For Reg CF, rather than all 50 states plus the District of Columbia and other territories being able to require notice filings, only the state of the principal place of business of the company, and the state in which more than 50% of the securities are sold in the offering (if any) may require notice filings.
Based on the manner most state securities laws are written, many states must enact specific rules to require notice filings. Some state laws provide for notice filing requirements without…
This entry is filed under Crowdfunding, Section 4(a)(6), State Law
Following the release of the “Simple Agreement for Future Tokens” or “SAFT” documentation by Protocol Labs and Cooley LLP, the possibility of doing blockchain token sales has been expanded to companies at even earlier stages of development. When selling a token, companies needed to have more architecture developed with respect to their platforms so that they could issue tokens with rights that corresponded to the operations of those platforms. With the SAFT, those companies can sell securities to investors on the promise that tokens will become available to those investors when the platform is operational and the token rights are known.
While the SAFT is not…
This entry is filed under Capital Raising, ICO, Regulation A, Section 4(a)(6), Securities Law
Here's another issue addressed in our ever-expanding memo on the securities laws raised by ICOs.
Some founders and company insiders, including those who got their securities in “pre-sales,” may want to resell their tokens when secondary trading starts. Hold up there, Skippy. You may wish to consider a couple of things before you do that. First, might you be in possession of any “inside information”? That is, stuff you know about the company or the project that other investors don’t and which they might think is important when deciding to buy your tokens? Thought so. Don’t sell without making sure everybody else in the market has that same information. Second,…
This entry is filed under ICO, Regulation
(This is the first of what will be a series of blogs addressing ICO offerings made in compliance with securities laws. Click here to view our memo that will cover the topic more extensively.)
CrowdCheck is working on a Regulation A ICO. That means we are in effect trying to push a five-dimensional square peg into a two-dimensional hole that was dug in the 1930s (please refrain from trying to find me better analogies). There are a lot of issues that have to be addressed. One we are looking at at the moment is Section 12(g) of the Securities Exchange Act. Section 12(g) says that if you have assets of $10 million and a certain number of “holders of record” of a…
This entry is filed under Crowdfunding, ICO, Investing, Regulation A, Rule 506(c), SEC, Types of Securities
Every company offering securities to investors under Regulation Crowdfunding (“Reg CF”) is required to provide financial statements that are prepared in accordance with generally accepted accounting principles. For offerings seeking over $107,000, those financial statements are required to be reviewed by an independent public accountant (second helpings under Reg CF may require financial statements audited by an independent public accountant for raises of more than $535,000 in the prior 12 months). While most companies have correctly complied with the review or audit requirement, some companies have failed to engage accountants that are actually independent,…
This entry is filed under Crowdfunding, Financial Statements, Regulation A, SEC, Section 4(a)(6)
Our memo regarding issuer-dealer registration for companies considering an offering under Tier 2 of Regulation A has been updated with the inclusion of Nebraska following recent pronouncements from its Department of Banking and Finance. The updated memo can be obtained here, https://www.crowdcheck.com/sites/default/files/Reg%20A%20Issuer-Dealer%….
This entry is filed under Regulation, Regulation A, State Law
Some folks, especially traditional securities lawyers, have recently been startled by flashy ads on the TV and radio for offerings of securities, specifically Regulation A securities in start-ups. We’ve had a number of calls, and there have even been some newspaper articles, asking “They can’t do that, can they?”
They can.
This is not the stuffy old traditional IPO world. This is Reg A, dudes and dudettes, where the rules are different and any start-up company that can afford it (ha!) can make sizzling ads that send potential investors rushing to buy their shares.
Provided they comply with two simple rules (and watch the timing because the rules change once the…
This entry is filed under Capital Raising, Offering materials, Regulation A, SEC, Securities Law
You are almost at the home stretch in your Regulation CF offering; however, there are still a few more formalities that need to occur.
First, you will need to identify who will be signing on your Form C. The SEC requires the following individuals to sign:
Individual who will sign on behalf of the company
Principal executive officer or officers
Principal financial officer
Controller or principal accounting officer
Majority of members and/or directors of the company
Second, you should have a filing day plan. Each of these individuals will be “signing” a document that will be filed with a federal agency. Which means they are acknowledging responsibility for…
This entry is filed under Crowdfunding, Section 4(a)(6), Securities Law
There’s a right way to do everything, even failing to file with the SEC.
We experienced this recently, when one of our Regulation A clients was unable to make its annual 1-K filing covering the year 2016. We’d been watching their progress carefully, and so a few days before this year’s filing deadline of May 1, we picked up the phone and asked the regulators about the best way to handle the situation and to position ourselves to get back into compliance as soon as possible.
First rule of holes: when you are in one, stop digging. In the Regulation A context, this means not making any offers or sales of securities when you don’t have an exemption from SEC…
This entry is filed under Bad Actor, Crowdfunding, Failure, Liability, Regulation A, SEC, Blog
So, one year ago today, Regulation CF went into effect. Small companies can make offerings up to $1 million (recently increased to $1.07 million) and roughly 325 companies have made Reg CF offerings so far. Roughly 80 companies have filed Form C-U to notify the SEC of the conclusion of their offering (they can also use Form C-U to report progress of the deal, so the raw numbers need refining). Another 50 or so companies have taken advantage of the fact that the SEC tells us that multiple closings are permitted once a company reaches its target offering amount, and so have received funds but have ongoing offerings.
We’re talking about modest success so far.…
This entry is filed under Crowdfunding, Disclosure, Failure, SEC, Section 4(a)(6), Blog