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Delivering All Things Crowdfunding and Online Investing

 
April 13, 2014 by Sara Hanks
Lawyers will know the name of Louis Loss, one of the gods of securities regulation. From one of his key works, writing about the Securities Act of 1933: In short, Congress did not take away from the citizen “his inalienable right to make a fool of himself.” It simply attempted to prevent others from making a fool of him. Loss was writing about one of the underlying principles of the Securities Act, which is full disclosure. A blog is not the place to get into the nitty gritty of disclosure versus merit regulation, and the impact that disclosure has on on the merits of an offering, but here’s the basic theory: if you tell the truth, the whole truth and nothing...
This entry is filed under Crowdfunding, Failure, Fraud, Securities Law, Blog
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April 07, 2014 by Andrew Stephenson
The buyout of Oculus VR has renewed interest in the possibilities of securities crowdfunding.  The tricky part of recreating the crowdfunding success of Oculus VR is to generate the same excitement as a rewards campaign within the bounds of a serious securities offering.  In our previous post, CrowdCheck noted some of the issues that can arise when undertaking a combined securities and donation/rewards crowdfunding campaign.  This post will look at a slightly different transaction that accomplishes a similar end: providing donation/rewards crowdfunding style perks as dividends, which some commentators have floated as an option for companies with limited cash....
This entry is filed under Crowdfunding, SEC, Section 4(a)(6), Securities Law, Blog
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April 02, 2014 by Andrew Stephenson
The Facebook acquisition of Oculus VR has brought a lot of attention to crowdfunding campaigns by early stage companies.  Some of that attention has not been positive; even resulting in death threats to the Oculus VR founders and their families.  Much of the more constructive criticism is based around the question of whether the 9,522 Kickstarter backers, who contributed $2,437,429 to Oculus VR, should be entitled to something as a result of such a large acquisition.  Clearly, the Kickstarter campaign was donation/rewards style crowdfunding.  The backers received everything they were going to get as a result of their contribution.  They did not acquire any...
This entry is filed under Crowdfunding, Section 4(a)(6), Securities Law, Blog
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March 27, 2014 by Andrew Stephenson
I don't understand the reaction to Facebook buying Oculus by opinion writers.  Much of it seems to misrepresent either what was expected to happen or the cause of what happened.  For example, Joel Johnson, an early backer of Oculus on Kickstarter and writer for ValleyWag is disappointed his contribution enabled Oculus to obtain venture funding, leading ultimately to the Facebook acquisition.  Then there are writers like Barry Ritholtz, who for some reason expresses an opinion that securities crowdfunding under the JOBS Act is to blame for the scam inflicted by Oculus onto its Kickstarter backers.  The first reaction seems a bit naive.  The second comes off...
This entry is filed under Crowdfunding, Disclosure, Due Diligence, Section 4(a)(6), Blog
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March 19, 2014 by Andrew Stephenson
With the amount of attention that intrastate crowdfunding has been getting lately, we thought it would be important to highlight the key requirements, limitations, and conditions of those various state statutes and rules.  You can find our summary chart here.
This entry is filed under Crowdfunding, SEC, Securities Law, Blog
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March 19, 2014 by Andrew Stephenson
In recent months, individual states have been jumping on board the crowdfunding bandwagon by revising their securities laws to make it simpler for companies in their states to raise capital from individual investors over the internet.  These are laudable efforts and will help small companies legally raise funds from outside investors.  As other commentators and analysts have described, these intrastate crowdfunding exemptions have limited filing requirements with state governments and utilize the Section 3(a)(11) exemption from federal registration of the offerings under the Securities Act.  From the standpoint of the companies issuing securities, this seems...
This entry is filed under Crowdfunding, SEC, Section 4(a)(6), Securities Law, Blog
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March 03, 2014 by Andrew Hanks
CrowdCheck Rolls Out Bad Actor Report For Crowdfunding Issuers http://bit.ly/1eNjJLS
This entry is filed under Bad Actor, Fraud, In The News, Blog
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February 28, 2014 by Andrew Stephenson
In our previous installments of our "Getting ready for seeking investment" series, we have talked about having the right corporate form, proper incorporation and remaining in good standing, and holding and documenting board meetings.  The next step in order to be ready for investors is knowing how you are going to keep track of your ownership.  Keeping track of its ownership is an essential activity for any company.  At each stage of growth, your company records should keep pace as well.  Importantly, your shareholders and investors have rights that you need to make certain are honored.  This task can become more difficult if shares are issued without...
This entry is filed under Due Diligence, SEC, Securities Law, Blog
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February 10, 2014 by Andrew Stephenson
SEC Chair Mary Jo White is bringing the New York cop-on-the-beat attitude to the SEC's enforcement of securities law violation.  In a speech before the Securities Enforcement Forum on October 9, 2013, Chair White indicated that on her watch, the SEC will pursue enforcement in a manner not unlike that of New York City in the 1990s.  New York law enforcement in that era implemented its "broken windows" strategy — no infraction was too small to be uncovered and punished because an environment of disorder encourages more serious crimes to flourish. Chair White wants the SEC to undertake a similar strategy to achieve its mission of investor protection.  According to...
This entry is filed under Fraud, SEC, Securities Law, Blog
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February 05, 2014 by Brian Knight
What are we gonna do to screen for you… Sorry, as a child of the 80s I couldn’t resist, but my bad version of the classic “Cops” theme does reflect a serious question: how are issuers and intermediaries going to comply with the new “Bad Actor” disqualification provisions of Rule 506, Regulation A, and Regulation Crowdfunding offerings? The short answer is to use CrowdCheck’s BadActor Report℠. Why CrowdCheck is the answer will require some explanation. The first obvious question is, what are those disqualification provisions? Well, the full text of the rule is here, and a condensed analysis is here (page 7), but the really condensed analysis is this: companies...
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