Crowdcheck Blog
Insights and information for online capital formation
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 The Earth is flat, the former president has been replaced by a clone and it’s impossible to summarize some of the stupid stuff that the QAnon people believe.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
Most of the scams and schemes from the lower end of the public markets eventually make it over to the Reg A market, and this one is no exception. It’s essentially a variation on the “funder acting as undisclosed underwriter” caper.
Section 3(a)(10) of the Securities Act provides that the issuance of securities pursuant to a court-approved settlement is exempt from registration. The general idea is that the oversight by the court provides the investor protection that would otherwise be provided by SEC registration. It’s intended to protect the lender whose debt is being converted into equity.
Except in this case, it’s not the lender that needs protection.
In…
This entry is filed under Fraud, Regulation A, SEC, Securities Law
In an earlier blog post, we mentioned that while Regulation A preempts state review of offerings under Tier 2 of Regulation A, states are still given the authority under Section 18 of the Securities Act to require issuers selling securities under Regulation A to make notice filings and pay filing fees before they can offer securities in the states. Section 18 also preserves the states’ authority to enforce their respective antifraud statutes.
Since our last blog post, 40 states and the District of Columbia have adopted notice filing requirements. CrowdCheck assists many issuers in making their notice filings. Historically, once a filing was submitted, we…
This entry is filed under Regulation, Regulation A, State Law
The SEC has published a Concept Release on the Harmonization of Securities Offering Exemptions. The SEC summarizes the reason for this move as follows:
Over the years, and particularly since the Jumpstart Our Business Startups Act of 2012, several exemptions from registration [of offerings with the SEC] have been introduced, expanded, or otherwise revised. As a result, the overall framework for exempt offerings has changed significantly. We believe our capital markets would benefit from a comprehensive review of the design and scope of our framework for offerings that are exempt from registration. More specifically, we also believe that issuers and investors…
This entry is filed under Capital Raising, Crowdfunding, Federal Law, Regulation A, Rule 506(b), Rule 506(c), SEC, Securities Law
Well, I already blogged about the zombies of the crowdfunding world, so let’s look at the vampires too. Those exploitive professionals and semi-professionals who seize on small companies desperate for capital and do nothing but suck the lifeblood from them, in terms of money, time and management focus, and deliver nothing.
We are in the process of creating a “prohibited providers” list for one of our platform clients. Two other clients independently have each dubbed their own similar list the “creeps list.” OTC Markets publishes its prohibited service providers list, which is an admirable public service to everyone in this market.
Who goes on a “creeps list”?…
This entry is filed under Capital Raising, Crowdfunding, Fraud, Regulation, Regulation A, Blog
Online securities platforms should be paying attention to the Lorenzo case, which the Supreme Court decided last month concerning the scope of Rule 10b-5 fraud liability.
The case involved a broker who sent out a couple of emails at the direction of his boss. The boss created the content of the emails and approved them. All Mr. Lorenzo did, in effect, was add his name and press send. But he knew that there were misstatements in those emails.
It’s already clear that anyone who makes a false statement (and there’s another Supreme Court case that explains what it means to “make” a statement that online platforms should be aware of) is liable under the anti-fraud…
This entry is filed under Bad Actor, Disclosure, Fraud, Liability
Regulation A is an exemption from registration of securities under the Securities Act of 1933. At the same time, it is a public offering of securities. This puts Reg A in an odd place when it comes to SEC review.
For the most part, the operating companies utilizing Reg A are early stage companies. This is not entirely what the SEC envisioned when adopting its amended Reg A Rules. In that release, the SEC believed most use would come from companies opting for Reg A rather than a traditional IPO. Other observers took the view that Reg A would act as a later stage, pre-IPO round, allowing an exit opportunity for some venture investors. Instead, Reg A offerings by…
This entry is filed under Disclosure, Regulation A, SEC