Crowdcheck Blog

We are often asked by companies, “why can’t I do [fill in the blank]? I see this other company doing it.” Our response has always been that just because those other companies have not yet been subject to enforcement, doesn’t mean that there will not be an issue later on. The time and effort to build a case, and often reaching a settlement, means that public knowledge of enforcement lags.  The SEC has recently made this clear in regards to non-compliant offers and sales under Reg A. On May 16, 2023, the SEC announced 10 settlements with issuers that violated the rules of Reg A. See, https://www.sec.gov/news/press-release/2023-94. The common theme of the…

Hi everyone; a reminder that we are just over a month away from the deadline to file Form C-AR by May 1.* We wanted to flag some issues: If you sold any securities under your Form C, even if you didn’t sell them until this year, and even if you didn’t sell them until April 30, a Form C-AR with 2022 financials is due by May 1. Even if your current Form C already includes 2022 financial statements, a Form C-AR is due by May 1. If you do not have an open offering or otherwise have audited or reviewed statements available, the financial statements do not have to be audited or reviewed, but they do need to be in US GAAP format. This means balance sheet (as at…

That picture probably isn’t an emoji, because emojis aren’t detailed enough for a message of that size. But they do convey some information, which is why, we assume, people use them. And since emojis are capable of conveying information, they are also capable of conveying misinformation, even misleading information that violates the securities laws. For some time, we’ve been discouraging our clients from using emojis or other images that could be misleading. Rocketships and unicorns have long been on our “bad words list”. But a recent court case got the attention of some of our clients. It’s not a case about emojis, rather it’s a classic “are these things…

We’ve been having a lot of “why can’t we do what they are doing?” conversations recently. Potential issuers have asked: Why can’t they structure a Reg A real estate offering where the issuer invests in minority holdings in other real estate companies? Why can’t they file a 1-Z to exit the Reg A reporting system without bringing their ongoing reporting into compliance? Why can’t they file a new Reg A offering without bringing their ongoing reporting into compliance? Why can’t they increase the size of their Reg A offering by filing a Supplement to the Offering Circular? Why can’t they advertise without including a link to the Offering Circular? In all these…

A regulation crowdfund, it seems, Is a way for small firms to raise some green, Without need for a broker, or lots of red tape, Through the power of the crowd, and a site to escape.   With a cap on the amount that can be raised, And a limit on who can invest and be praised, It's a way for the little guy to get funded, And for investors to support something they've wanted.   So if you've got a dream, and you need some cash, Consider a regulation crowdfund, don't be rash, It might be the boost that your business needs, To succeed in the market, and fulfill your dreams.

When it comes to Regulation A and Regulation CF, the SEC puts a lot of focus on the financial statements being provided to investors. And that makes sense. Financial statements can tell a lot about a company, and the financial position of that company could be one of the primary reasons for investing (even if that means there is no financial history and investors are taking a risk). Recently, we have seen a lot of would-be issuers get tripped up by the requirement to provide financial statements related to real estate they intend to acquire. Sometimes, they also received bad advice that they can form a new company and only provide audited statements for that…

We’ve heard from some of our clients that potential investors are getting spooked by the crypto winter and the FTX meltdown. Yes, you can invest in crypto online, just like you can invest in online exempt public offerings under Regulations A, CF and D. But that’s pretty much where the similarity ends. There are a number of differences between the crypto world and online exempt securities offerings. These include the types of investments offered. Crypto comprises purely digital assets, which may be in various stages of development, may or may not work, may or may not have value and in some cases may vanish overnight if investors lose confidence in them. The…

It’s 1-SA filing season again for Regulation A filers, and time to make some observations about the consequences of not filing. We have encountered more than three companies in the last three months that have not filed all (or in one case, any) of their ongoing filings, and yet have requalified their offerings or qualified new offerings. This is a problem. Let’s start with the ongoing reporting requirements. Assuming a Reg A filer has a December year-end, under Rule 257 it has to file its annual Form 1-K by April 30 and its semi-annual 1-SA by September 28 (subject to adjustments for leap years and weekends). It may also need to file “current” reports on Form 1…

So May 2 marked the due date for most companies in the crowdfunding world to file their annual reports on Form 1-K or C-AR. And many companies didn’t. Do I need to remind you that in order to make an offering under either Reg A or Reg CF, if you have made offerings under that exemption before, you have to have made ALL ongoing reports required by the exemption in the previous two years before relying on that exemption again? Apparently I do. Now for some companies, it’s possible to get back into compliance just by filing a compliant report (or reports plural, if you are missing more than one), even if it’s late. We’ve discussed in detail what companies are…

One of the great benefits to issuers under the SEC’s rules for offerings under Tier 2 of Regulation A, effectively created by the JOBS Act, is the preemption of state requirements for registration of the offer and sale of securities. Known as “Blue Sky Laws”, these state specific rules added considerable cost to qualifying an offering under Regulation A. The SEC determined it was appropriate to preempt state qualification rules by deeming securities offered and sold under Tier 2 of Regulation A to be sold to “qualified purchasers” under Section 18 of the Securities Act. Under Section 18, states are still given the authority to require filing fees and notice…