Beware of Investment Fraud Schemes! The Securities and Exchange Commission has issued an alert to investors about fraudulent schemes being promoted during the COVID-19 pandemic. The SEC can issue trading suspensions and use other enforcement tools, as needed, but that doesn’t always make the investor, who was misled, entirely whole. The best way to avoid…
An accredited investor – How is the definition being expanded? The proposed rule will amend the definition of an “accredited investor” as follows: With regard to individuals, the proposed rule would add the term “spousal equivalent” to the definition of a spouse, and give accredited investor status to individuals: that have certain professional certifications or…
Mergers and acquisitions are an integral part of how industries are shaped. They can allow smaller companies to better compete with larger established companies or consolidate market share to increase profits. Being acquired can also offer a smaller business a less costly route to become a public company. The terms, merger and acquisition, are often…
What is Materiality? Materiality is a type of fraud because it uses informational defects to evade a transaction. A fact is material if “there is a substantial likelihood a reasonable investor would consider important” while deciding something concerning securities. (TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976). The Supreme Courts wanted to make…
We recently posted about the advantages of a Private Placement Memorandum (ppm), and the necessity of complying with all of the requirements to stay within the exemption granted by the Securities and Exchange Commission. This post explores the reasons you need the assistance of a securities attorney in the preparation and execution of your PPM…
Capital Formation, Liquidity, and Risk Management The three basic functions of securities markets are capital formation, liquidity, and risk management. These markets pair the companies that need capital to function. Investors with capital are looking for a return on their investments. It also connects investors together. Those that are looking to liquefy and sell their…
“The term sheet is one of the most critical documents an entrepreneur can ever design or sign.” According to Forbes. What is a Term Sheet? it’s a document that results from initial negotiations between the business owner and potential investors prior to selling your stock to outside investors. It is a non-binding contract document,…
What does the JOBS Act of 2012 do? This gives small companies the ability to use online markets to sell securities to many small investors. This is the first time that non-public companies can raise capital from public investors without needing to go to register their offerings under state or federal law. This does not…
General Solicitation is the act of marketing a capital raise publicly. Rule 506(b) of Regulation D prohibits using general solicitation to market securities. General solicitation is undefined in the statutes or rules, and the Securities and Exchange Commission (SEC) takes a case by case approach. A typical example of general solicitation is telling potential investors…
Regulation D Rule 504 and Rule 506 grant exemptions from registration if different requirements are met. Rule 504 Rule 504 of Regulation D provides an exemption from registration for a 12-month period on the offer and sale of up to $5,000,000. Rule 504 permits general offerings and solicitations so long as they are restricted to…
