Thoughts on the Proposed Crowdfunding Regulations

On October 23, 2013, the Securities and Exchange Commission issued proposed regulations to implement Title III of the JOBS Act, which will allow for the public sale of securities using crowdfunding under an exemption from registration under securities laws. [Read more...]

AngelList Posts Thoughtful Comments to Proposed SEC Form D Regulations

On August 12, 2013, the crowdfunding platform AngelList submitted some really great and thoughtful comments to the SEC with respect to the SEC’s proposed Reg. D amendments related to new Form D filing requirements and enhanced penalties for failure to file (which you can read more about here). AngelList expressed its concern that the newly proposed Form D rules would result in “disastrous unintended consequences” for startups, observing that proposed rules reflect how sophisticated Wall Street issuers, investment banks, and law firms, rather than early stage businesses, engage in capital raising. [Read more...]

SEC’s Proposed Regulation D Rules Generates Wide Ranging Concern

In my last post, I discussed new proposed Regulation D rules which impose new obligations upon issuers of securities in private placements. In that post, I expressed some concern that these new rules could be quite burdensome, especially the rule disqualifying issuers from using Rule 506 on future securities offerings for failing to file Form D in a timely fashion. Others involved with startup capital formation have also expressed similar concerns. In this post, I’ll compile the comments I’ve seen thus far. [Read more...]

The SEC Finally Lifts the Ban on General Solicitation

On July 10, 2013, the Securities and Exchange Commission finally issued its regulations lifting the ban on general solicitation pursuant to Title II of the Jumpstart Our Business Startups Act (“JOBS Act”). The lifting of the ban will take effect in about 60 days from now.

Release No. 33-9415, entitled “Eliminating the Prohibition Against General Solicitation and General Advertising in Rule 506 and Rule 144A Offerings,” is the final rule adopting amendments to Rule 506 and Rule 144A pursuant to Title II of the JOBS Act. The amendment to Rule 506 permits an issuer to engage in general solicitation or general advertising in offering and selling securities in reliance on the exemption in Rule 506 as long as all purchasers are accredited investors and the issuer takes reasonable steps to verify that status. Form D will be revised to require an issuer to check a box to indicate whether it is relying on the provision that permits general solicitation or general advertising in a Rule 506 offering (which will now be called Rule 506(c)) or the issuer is relying on the traditional Rule 506 exemption which still prohibits general solicitation (now called Rule 506(b)). The amendment to Rule 144A provides that securities may be offered pursuant to Rule 144A to persons other than qualified institutional buyers as long as the securities are sold only to persons that the seller reasonably believes are qualified institutional buyers. The text of the release, which includes the final rule, can be found here. [Read more...]

The JOBS Act, a Year Later – Part 7: Titles V and VI and Concluding Thoughts

This post is the seventh and final in a series examining the impact of the Jumpstart Our Business Startups Act (or JOBS Act) one year after its passage and focuses on Titles V and VI of the law and provides some final concluding thoughts.

Titles V and VI of the JOBS Act are closely related in that they both pertain to when private companies must register their securities under the Securities Exchange Act of 1934. Typically, after a startup has gone through multiple rounds of financing and has provided equity compensation to a large number of employees, it finds itself in a position where the number of shareholders it has triggers the requirement to register its securities and begin periodic public reporting of material information, in effect making it a public company. But this transition is not always desired by the company’s management or controlling shareholders. [Read more...]