For the first time, regulators are taking action against one of the many crowdfunding sites that have sprung up since the passage of the JOBS Act. The Ohio Division of Securities issued a notice of intent to issue a cease-and-desist order against the Cincinnati-based crowdfunding platform SoMoLend and majority owner/CEO Candace Klein in June. If issued, the order will shut down SoMoLend. [Read more...]
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...]
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...]
On July 10, 2013, the same day it announced the adoption of rules permitting general solicitation under certain conditions and disqualifying “bad actors,” the Securities and Exchange Commission issued proposed new rules entitled “Amendments to Regulation D, Form D and Rule 156 under the Securities Act.” The proposal dramatically increases the Form D filing requirements for Rule 506 offerings and increases the consequences for failing to file Form D or filing Form D late.
Previously, I summarized the Securities and Exchange Commission’s implementing regulations of Title II of the JOBS Act, lifting the ban on general solicitation for offerings exempt under Rule 506 of Regulation D, which were finalized on July 10, 2013. At the same meeting, the SEC also finalized regulations which implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the SEC to exclude certain felons and other “bad actors” from reliance on Rule 506.
Release No. 33-9414, entitled “Disqualification of Felons and Other ‘Bad Actors’ from Rule 506 Offerings,” is the final version of the rule and can be found here. “Bad actor” (or “bad boy”) disqualification provisions disqualify securities offerings from reliance on an exemption from registration if the issuer or other key persons (such as underwriters, placement agents, or directors, officers, or significant shareholders of the issuer) have been convicted of, or are subject to court or administrative sanctions for, securities fraud or other violations of specified laws. While such provisions can be found elsewhere in federal and state securities regulations, Rule 506 did not previously include any. [Read more...]