Crowdcheck Blog
Insights and information for online capital formation
This is the second in a series of blog posts on the topic of the SEC’s proposed changes to the exempt offering matrix. Below is a link to the first post:
SEC exempt offerings: process
Oh, SEC, how you tease. Back in June 2019, the Concept Release on exempt offerings discussed the Regulation A offering circular (OC) delivery requirements that we flagged as problematic some time ago. (The rules require that, after qualification, written offers -- this includes radio and TV -- must be “accompanied or preceded by” the OC. This is not something you can do on TV or radio, or, for that matter, in tombstone ads in the WSJ.) The discussion in the text of the Concept…
This entry is filed under Capital Raising, Crowdfunding Conditions, Disclosure, Offering materials, Regulation, Regulation A, SEC, Securities Law
On March 26, 2020, the SEC adopted temporary amendments to the rules governing the filing of periodic and current reports under Regulation A (Rule 257) and Regulation Crowdfunding (Rule 202) to provide relief to issuers that are challenged in meeting their obligations to file those reports on a timely basis because of the outbreak of coronavirus disease 2019 (COVID-19). If an issuer is not able to meet a filing deadline that falls during the period from and including March 26, 2020 to May 31, 2020 (the “Relief Period”), the issuer will have 45 days from the date that the report was due to file the report, subject to certain conditions (the "Extension Period…
This entry is filed under Crowdfunding, Regulation, Regulation A, SEC
This will be the first in a series of blog posts on the topic of the SEC’s proposed changes to the exempt offering matrix. This first one is (mostly) about process.
The SEC has proposed changes to its rules for exempt offerings. The rules would change aspects of Regulations A, CF and D and the way they all work together. We’ll be getting into the details over the course of the next few weeks, but we wanted to mention a few things before diving in.
First, these are PROPOSED rules. They are not going into effect for a while (see timing below). They might never go into effect. They might just sit on a shelf gathering dust. They might get changed and reproposed.…
This entry is filed under Crowdfunding Conditions, Federal Law, Regulation, Regulation A, Rule 506(b), Rule 506(c), SEC, Section 4(a)(6), Securities Law
One aspect of Regulation A that does not seem to be getting the attention it should is the fact that it facilitates investment into things other than the future performance of early-stage companies. Real estate is an obvious alternative to early-stage equity. Even where the real estate project has not been built out yet, real estate investments (which may be REITs or other real estate funds) promise investments that have an earlier time horizon, in some cases more liquidity and in many cases generate cashflow in real time. There have been scored of successful real estate offerings under Regulation A.
A completely different category of offerings that is taking…
This entry is filed under Capital Raising, Federal Law, Regulation A, Securities Law, Types of Offerings
After undertaking an offering under Regulation Crowdfunding or Tier 2 of Regulation A, issuers are required to file ongoing reports with the SEC. Regulation Crowdfunding requires an annual report, while Tier 2 of Regulation A requires an annual report and semi-annual report. Regulation Crowdfunding also requires companies to make the annual report available on its own website.
The annual report for Regulation Crowdfunding requires financial statements prepared in accordance with GAAP and certified by management. For Tier 2 of Regulation A, the annual report requires audited financial statements, and the semi-annual report requires management certified financial…
This entry is filed under Crowdfunding, Financial Statements, Regulation A
I love it when SEC Commissioners quote (arguably even cite in support) the Boss.
This is Hester Peirce, aka CryptoMom, proposing a safe harbor for crypto entrepreneurs who are developing tokens on networks yet to be built. She summarizes the problem thus:
Many crypto entrepreneurs are seeking to build decentralized networks in which a token serves as a means of exchange on, or provides access to a function of the network. In the course of building out the network, they need to get the tokens into the hands of other people. But these efforts can be stymied by concerns that such efforts may fall within the ambit of federal securities laws. The fear of running…
This entry is filed under Capital Raising, ICO, SEC, Securities Law
We’ve had this question come up a couple of times in recent deals, so it’s worth flagging. Under Regulation A, you can have offering statements in effect (and thus offerings open) for more than a year (they can even last three years under certain circumstances). However, if your continuous offering is going to last more than a year, at least once a year you have to file a post-qualification amendment (PQA) to “refresh” the offering statement. This is required by Rule 252(f)(2)(i), which says:
Post-qualification amendments must be filed in the following circumstances for ongoing offerings:
(i) At least every 12 months after the qualification date to include the…
This entry is filed under Capital Raising, Disclosure, Federal Law, Financial Statements, Regulation, Regulation A
The SEC has proposed amending the definition of “accredited investors.” Accredited investors are currently defined as (huge generalization here) people who have net worth of $1 million (excluding principal residence) or income of $200,000 ($300,000 with spouse) or entities that have assets of $5 million. Here’s the full definition.
The whole point of the accreditation definition was that it was it was supposed to be a way to determine whether someone was able to “fend for themself” in making investment decisions, such that they didn’t need the protection that SEC registration provides. Those people may invest in private placements. The thinking at the time the…
This entry is filed under Capital Raising, Offerings: Traditional Regulation D, Regulation, Rule 506(b), Rule 506(c), SEC, Securities Law
Look, there’s a whole shed-load of stupid out there. Some people will believe anything they read on the internet. The Earth is flat, the former president has been replaced by a clone and it’s impossible to summarize some of the stupid stuff that the QAnon people believe.
These people vote, which is a problem for a different time and place. But these people invest, which is very much an issue for the crowdfunding community. People are influenced by trolls and the purveyors of false information. We’ve encountered various forms of trolling on the communication channels on Reg CF funding portals and on the social media sites of issuers raising funds. While some…
This entry is filed under Crowdfunding, FINRA, Fraud, Regulation, SEC, Section 4(a)(6), Securities Law, Types of Investors
Following our update in March of this year, the Nebraska legislature has taken action to provide an exception to the requirement for a company to register as an issuer-dealer in the state when making offers and sales of securities under Tier 2 of Regulation A so long as no commission or other remuneration is paid for soliciting investors. We have also included a new section regarding state review of notice filings and the content of the Regulation A offering statement under their anti-fraud authority.
As a reminder, while states are preempted from requiring qualification or registration of offerings of securities under Tier 2 of Regulation A, states may require…
This entry is filed under Capital Raising, Regulation A, Securities Law, State Law