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July 01, 2015 by Sara Hanks
Pretty much everyone knows by now that audited financial statements are required for offerings under Tier 2 of Regulation A. While the SEC doesn’t require audited financials (or any kind of review by outside accountants) for Tier 1, some states do require audited financials in Tier 1 offerings. But do you know what the audit letter is supposed to look like? That is important. Without getting too much into the weeds, the SEC requires that audit reports meet the requirements of Regulation S-X. And that means those audit reports must be “clean.” There can’t be any reservations or qualifications or limitations on scope on the audit. Here’s an example of the...
This entry is filed under Crowdfunding, Regulation A, SEC, Blog
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June 29, 2015 by Sara Hanks
Those of us keeping an eye on filings under revised Regulation A (“Regulation A+”) have noted that, as of today’s date, there have been six public filings and five of those have apparently been withdrawn. I don’t think the chances of the most recent one surviving are high, either. What happened? Well, only the SEC Staff and the companies who made the filings know the truth, and several of the filings had more than one obvious issue, but here’s a thing they all had in common: No financial statements. As all securities lawyers practicing before the SEC know, you do not file (even confidentially) with the SEC until your filing is substantially complete. That...
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June 24, 2015 by Sara Hanks
The Staff of the SEC's Division of Corporation Finance has posted some Compliance and Disclosure Interpretations ("CD&Is") here (scroll down to Section 182). Nothing surprising, but some useful stuff there. Possibly the most important interp is the one relating to Twitter (Q 182.09), which says if you can't fit the disclosure required by Rule 255 into a Tweet, you can link to that language, but if you can fit the required disclosure into an electronic communication, then you must; linking isn't enough.
This entry is filed under Crowdfunding, Disclosure, Regulation A, SEC, Blog
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June 19, 2015 by Sara Hanks
Good lord, there is a lot of nonsense being written about revised Regulation A, which went into effect this morning. People are saying the SEC has opened up investment to a whole new class of investors and companies. People are saying that companies were never able to publicly solicit from non-accredited investors before. People are saying that now you don’t have to know your investors personally, like you did before. Folks, most of this is sheer nonsense. Regulation A has been around since 1936. Under Regulation A you have always been able to make public offers to non-accredited investors. Under Regulation A you’ve also been able to “test the waters”, that is...
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June 17, 2015 by Andrew Stephenson
As part of every due diligence exercise for operating companies, real estate projects, and investment funds, CrowdCheck will ask to see all of the minutes of the meetings of the Board of Directors or managing body, or the written consents in lieu of meetings, of the issuer in the securities offering.  Documented minutes or consents is a fundamental requirement of good corporate governance that all too often is simply ignored. At CrowdCheck we understand that for entrepreneurs running a lean startup, holding regular board meetings is time consuming and entrepreneurs would rather spend time on revenue building activities.  However, board meetings and minutes...
This entry is filed under Disclosure, Due Diligence, Securities Law, Blog
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June 15, 2015 by Sara Hanks
Less than a week to go before the revisions to Regulation A go into effect and many companies are making plans to make an offering. It's not too late to back out, though! It may seem odd that I'm saying this as both I personally and CrowdCheck as a company are very much in favor of Regulation A. But companies need to know that they may be making a long-term commitment to ongoing SEC disclosure requirements, and be comfortable with that. You're probably aware of the Regulation A ongoing disclosure requirements, which requires annual and semi-annual filings. The required disclosure is not too different from initial filings. But you have to bear in mind that at...
This entry is filed under Crowdfunding, Disclosure, Regulation A, SEC, Securities Law, Blog
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June 07, 2015 by Sara Hanks
By this point everyone knows that the financial statements you must provide to the SEC in Tier 2 Regulation A offerings must be audited by a CPA. We are seeing reputable CPAs offer their services at very reasonable prices for early-stage companies. But companies need to know exactly what is covered in their agreement with the CPAs. Does your contract with the CPA include responding to SEC comments on financial statements? The SEC review process involves both lawyers and accountants commenting on your filings, and you have to respond to those comments to the SEC's satisfaction. You may also have to restate your financial statements, ie change them and get a new...
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June 04, 2015 by Sara Hanks
Just over two weeks to go to revised Regulation A going into effect (setting aside the litigation) and time for another blog post. This time I'm looking at what an Offering Circular (the prospectus-like document that makes the offer of securities) is going to look like. You're going to be disappointed. It's going to be dull. I would say "very dull" but the SEC sometimes has a problem with adjectives. I know that the online alternative investment market that relies on Rule 506 of Regulation D under the Securities Act has been experimenting with many different types of disclosure. Videos! Pitch decks! PPMs with pictures of attractive people using the issuer's...
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May 29, 2015 by Sara Hanks
Three weeks to go to effectiveness of new Regulation A (we'll ignore the litigation for the moment), and time for a new topic: "testing the waters" (TTW). One of the great things about Reg A is the ability to find out, at low cost, whether it's worth hiring lawyers and accountants to prepare the filing with the SEC. You can use social media to find your crowd and ask them whether they want to invest, and in what amounts, and what kind of security they would be most interested in. But (and there's always a "but" in securities law, right?) there are some requirements you need to meet, both at the time you publish your TTW materials, and later. First, there is...
This entry is filed under Crowdfunding, Regulation A, Securities Law, Blog
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May 27, 2015 by Andrew Hanks
CrowdCheck, Inc. was named to Entreprenuer Magazine's "100 Brilliant Companies" for 2015 and joins nine other companies in the "From the Crowd" section.  100 Brilliant Companies to Watch: http://www.entrepreneur.com/article/245890 Brilliant 100 "From the Crowd" Edition:                     http://www.entrepreneur.com/article/245909 More crowd brilliance The iNaturalist app and website, maintained by the California Academy of Sciences, lets citizen “scientists” upload photos, notes or observations of wildlife populations. Beepi connects sellers and buyers of used cars (that pass inspection); if the car doesn’t sell in 30 days, the company will buy it.  Glow...
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