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Insights and information for online capital formation

March 27, 2015 by Andrew Stephenson
On March 25, 2015, the SEC adopted its final rules to implement Title IV of the JOBS Act of 2012.  These rules are popularly known as "Regulation A+" and provide for two tiers of offerings under Regulation A.  For more details on the new rules, check out CrowdCheck's summary here,
This entry is filed under Crowdfunding, Regulation A, SEC, Blog
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March 23, 2015 by Sara Hanks
Everybody’s buzzing about the fact that on Wednesday the SEC is going to adopt changes to Regulation A, finalizing the changes to Reg A that were mandated by the JOBS Act and first proposed by the SEC in December 2013. Assuming that the SEC makes the right call on state preemption (ie, votes to have Regulation A+ offerings reviewed only by the SEC and not by the states), this will make it possible for start-up companies to make offerings of securities publicly to all sorts of investors, with offering sizes up to $50 million. Is this crowdfunding? Yes and no. Why Reg A+ offerings look like crowdfunding: You can sell securities over the internet To lots of...
This entry is filed under Crowdfunding, Regulation A, SEC, Securities Law, Blog
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March 13, 2015 by Andrew Stephenson
One of the things that any securities due diligence should look at is whether a company or investment vehicle is in good standing with its state of organization. Good standing indicates that the company is validly formed, exists as a separate legal entity, and is up to date with its obligations for that particular state. For Delaware, that includes paying annual franchise taxes; and for many companies that consider the representation that the company "is in good standing" to be mere boilerplate, the March 1 filing deadline for Delaware franchise taxes has come and gone. Failure to pay in time is the principal reason that a company would fall out of good...
This entry is filed under Disclosure, Due Diligence, Blog
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February 12, 2015 by Andrew Stephenson
A recent Washington Post article by Steven Overly asked "Why has hardly anyone applied for equity crowdfunding in D.C.?"  This is an important question.  The DC Department of Insurance, Securities and Banking can be applauded for its efforts to promote the new rules.  Representatives of the Department have spoken about the new exception at a number of events and forums, including at the D.C Bar Association, at which CrowdCheck also presented. The article in the Washington Post cites four reasons to explain the lack of uptake: the availability of non-investment crowdfunding through sites like Kickstarter and Indiegogo; general lack of knowledge about the...
This entry is filed under Bad Actor, Crowdfunding, SEC, Securities Law, Blog
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January 15, 2015 by Sara Hanks
Well that didn’t take long. You know those Nigerian scams where someone emails you and asks you to help him spirit millions of dollars out the country, except you have to front him the bank fees? Well, it’s turned up in crowdfunding. We are aware of a couple of instances like this: Company posts its offering on a crowdfunding site. Investor who claims to be a money manager contacts company for details.  The investor may come from a respectable country where a lot of money managers are based, and it may have an online presence that seems to check out. Anti-money laundering and sanctions checks may come back negative. But then the investor raises an issue. It...
This entry is filed under Due Diligence, Fraud, Blog
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December 15, 2014 by Andrew Stephenson
Rethinking Section 3(a)(11) for State Crowdfunding
This entry is filed under Crowdfunding, SEC, Securities Law, Blog
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December 12, 2014 by Andrew Hanks
This entry is filed under Crowdfunding, Due Diligence, Fraud, In The News, Blog
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December 12, 2014 by Andrew Hanks
CrowdCheck CEO Sara Hanks looks into the timing of the JOBS Act crowdfunding regulations. Guest post on the Seedinvest Blog. This is the time of year when tiny tots, with their eyes all aglow, ask their mothers, “When will Chair White release the rules, Mommy?” Sorry, I got caught up in this week’s Santa-is-coming-with-crowdfunding-rules/Santa-is-not-bringing-anything-but-coal meme. There have been several articles published in the last few days speculating that the SEC’s rules for either Section 4(a)(6) (crowdfunding under Title III of the JOBS Act) or expanded Regulation A (Title IV under...
This entry is filed under Crowdfunding, In The News, SEC, Section 4(a)(6), Blog
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November 23, 2014 by Sara Hanks
Sounds so disreputable, doesn’t it? But some of the SEC rules that apply to stock touts apply to several types of activity in the new online markets. Back in Ye Olden Tymes (the tech bubble days of the late 1990s) the SEC’s newly formed internet task force brought 23 enforcement actions against 44 companies and individuals in one epic event. All 23 cases involved allegations of illegal touting of securities under Section 17(b) of the Securities Act. This is what Section 17(b) says: It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give...
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October 31, 2014 by Andrew Stephenson
Securities laws in the United States are based around the idea of disclosure and protection of the naïve investor from unscrupulous practices by issuers of securities —  the sophisticated guys duping the little guy.  However, for many early-stage companies, the sophisticated guys at the table are the investors.  Not only do they hold all the cards on the terms of the deal, they know exactly what type of recourse they have if things do not work out the way they would like. Take the rules surrounding securities fraud.  To succeed in a securities fraud claim the investor must show that the issuer made a misstatement of a material fact, or omitted information...
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