Anyone who knows me knows my link with the SEC’s Regulation S. While folks sometimes refer to it as an exemption from registration under the Securities Act, it’s not. Reg S provides that the registration provisions of the Securities Act simply do not apply to offers and sales made outside the United States, and then goes on to provide rules to determine whether an offer or sale is indeed outside the United States.

This came up no less than three times last week, so I figured it was worth a blog post.

Since the increase in the maximum offering amount to $5 million a couple of years ago, we’ve seen more interest in Reg CF offerings by venture-backed companies. Sadly, it doesn’t work for a lot of them.

We keep hearing this question.  To be honest, it’s not clear why a crowdfunding issuer would want to have to deal with the recordkeeping for what could be thousands of investors (and even if the issuer uses a Reg CF SPV, that itself is an issuer whose many shareholders have to be wrangled).

This is a question we often get from companies as they are trying to organize their cap table, or provide information to a transfer agent. Many companies seem to be of the belief that shares are not actually issued until a certificate is prepared, or that the shares are recorded on the company’s internal ledger, or the transfer agent’s ledger. However, this is not correct.

Companies often wonder, does it make sense to do a Reg CF offering rather than a Reg A offering?  Keep in mind that although selling securities using Reg CF may at first blush seem faster, cheaper and may have some advantages for marketing purposes, it is not always an easy calculation to make.  There are some other factors to consider when deciding:

We are often asked by companies, “why can’t I do [fill in the blank]? I see this other company doing it.” Our response has always been that just because those other companies have not yet been subject to enforcement, doesn’t mean that there will not be an issue later on. The time and effort to build a case, and often reaching a settlement, means that public knowledge of enforcement lags. 

Hi everyone; a reminder that we are just over a month away from the deadline to file Form C-AR by May 1.*

We wanted to flag some issues:

That picture probably isn’t an emoji, because emojis aren’t detailed enough for a message of that size. But they do convey some information, which is why, we assume, people use them. And since emojis are capable of conveying information, they are also capable of conveying misinformation, even misleading information that violates the securities laws.

We’ve been having a lot of “why can’t we do what they are doing?” conversations recently. Potential issuers have asked: