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Rule 506(b)

Delivering All Things Crowdfunding and Online Investing

December 19, 2016 by Sara Hanks
If you raise capital online, you're probably a New Economy, Internet 4.0 type of company, right? Leverage the cloud, move fast, break rules (not securities rules), create synergies, it's all about the hustle. Right? Maybe. Some of you new era companies should be huddling in your hoodies for shame, 'cos some of you have distinctly old school bylaws when it somes to stock certificates. Yes, stock certificates. Those bits of paper with incomprehensible things written on them that say who owns shares in your company. Some of you still have bylaws that say that paper stock certificates MUST be issued. And you are engaging great new transfer agents who do everything...
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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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September 02, 2014 by Andrew Stephenson
Previously, CrowdCheck has brought readers the message that no securities law violation is too small to bring on SEC enforcement.  It is part of the "broken windows" theory of policing—if you let issuers and brokers get away with the small violations, it sends a message that compliance with securities laws is merely optional.  But what happens if instead of a small violation, the SEC has issued an enforcement order against a financial behemoth, who now is subject to the Bad Actor rule prohibitions on participation in offerings utilizing Rule 506 of Regulation D? Such is the situation that Citigroup now faces.   As a result of the delayed entering into an...
This entry is filed under Bad Actor, Rule 506(b), Rule 506(c), 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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January 17, 2014 by Brian Knight
As an entrepreneur you are probably concerned about saving money.  Every dollar saved extends your runway just a little bit longer, lets you fight another day, and lessens the need for outside funding.  Fortunately, in many ways things are better than ever before for small businesses — computing power is cheap, off-the-shelf or web-enabled software provides functionality at a fraction of the cost of older solutions, and viral marketing provides the chance for a very high return on very limited investment.  Even the legal services market is being disrupted with new legal and quasi-legal (in the sense it isn’t required that someone be a lawyer to perform these...
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December 23, 2013 by Andrew Stephenson
Every major action your company takes—amending the articles of incorporation, hiring company officers, authorizing the issuance of securities, entering significant contracts, etc.—requires approval by your board of directors.  Every state requires a corporation to have a board of directors: some may require multiple directors; some require that there be at least one director.  The rules vary a bit here from state to state, so it is important to learn your state's specific requirements. In an early stage company, is it highly likely that your executive officers will also be the directors of the company.  It is fine that the officers and directors be the same...
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