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Insights and information for online capital formation

August 14, 2015 by Andrew Stephenson
Short answer, no. Long answer, maybe, but only after you wait for an extended period of time to ensure that no state would consider your testing the waters campaign to be integrated with your current offering.  Why is this important? At CrowdCheck, we have heard advice making the rounds that seems to forget that the states have retained their ability to regulate the registration of securities under Tier 1 offerings.  And states do take their registration requirements seriously. This post includes a survey of the filing requirements to communicate in a Tier 1 offering for all 50 states plus the District of Columbia and Puerto Rico. This post will not discuss the...
This entry is filed under Regulation A, SEC, Securities Law, Blog
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July 29, 2015 by Andrew Stephenson
Don't fool yourself.  While an offering under Regulation A+ is not an IPO on a stock exchange or full registration under the Securities Act, it is a big deal.  Your company is preparing for a public offering of securities and will be taking on investors with whom you do not have any previous relationship.  Those investors may have different ideas about the future of your company than you do and may demonstrate those ideas in the form of a lawsuit.  That said, if Regulation A+ is still right for your company, you can help to protect, or maybe mitigate or reduce that risk. The place to start is insurance.  There are a variety of insurance products out there to...
This entry is filed under Disclosure, Due Diligence, Regulation A, Blog
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July 14, 2015 by Sara Hanks
There’s an increasing amount of publicity out there from companies that are “testing the water” (TTW) before deciding to make a Regulation A offering. At CrowdCheck, we love the idea of TTW. It’s an efficient way of making sure that it’s going to be worth a company’s time to hire lawyers and accountants and go through the SEC review process. But there are important basic SEC rules that haven’t changed at all, and you need to bear them in mind. First, know that anything that “conditions the market” or promotes interest in a capital-raise, is an “offer” of securities. That can include posting a TTW campaign on an online investment platform, an appearance on...
This entry is filed under Crowdfunding, Disclosure, Regulation A, SEC, Securities Law, Blog
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July 08, 2015 by Andrew Stephenson
Online investment platforms and the EB-5 Visa investment community have been abuzz lately following the June 23 announcement by the SEC that is has issued a final order against Ireeco, LLC and Ireeco Limited for acting as unregistered brokers in violation of Section 15(b) of the Securities Exchange Act.  The practices by Ireeco, LLC included the establishment of an online portal that assisted foreign investors with selecting EB-5 Regional Centers and investment projects that suited the investor's interests.  Ireeco was then paid a fixed amount of the administrative fee typically charged to EB-5 investors by the Regional Center when the investor made his or her...
This entry is filed under Bad Actor, Failure, Fraud, Offerings: EB5, SEC, Securities Law, Blog
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July 06, 2015 by Andrew Stephenson
A common theme that CrowdCheck is hearing from potential issuers looking into using Regulation A+ is that they are not certain they want to take on the obligations of the ongoing reporting for an indeterminate length of time.  While understandable, the worries about the ongoing reporting requirements do not appear to fully take into account the options that companies have under Tier 2 of Regulation A.  Further, when compared to the potential cost of conducting a Tier 1 offering, the ongoing reporting does not look so bad. The SEC gives companies with ongoing reporting obligations under Tier 2 the ability to terminate those reporting obligations.  Under Rule 257...
This entry is filed under Disclosure, Regulation A, SEC, Securities Law, Blog
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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. [Correction: they weren't withdrawn, they were required to be amended prior to review.]  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...
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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...
This entry is filed under Regulation A, SEC, Blog
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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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