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, so…

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…

Part 1: What is an Opportunity Zone? The 2017 Tax Cuts and Jobs Act established a section of the tax code that allows taxpayers to utilize a new investment vehicle called “Opportunity Funds”, in an effort to bring resources to low-income communities known as Opportunity Zones. What is an Opportunity Zone? The Internal Revenue Service…

Preparing a Private Placement Memorandum(PPM) that provides full and fair disclosure of the material aspects of the offering is recommended when offering and selling a Regulation D investment. General solicitation includes websites, blast emails, and social networking media that can be viewed or accessed by the public.  Thus, PPMs should not be made available on…

What are primary and secondary markets?  There are two different settings in which securities transactions occur. The First Setting The seller of securities attempting to sell to investors in the action of raising capital for their company. The Second Setting Is a buy-sale transaction that happens when investors have already purchased securities and want to…

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