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…

Stock is included as a security under the securities definition “unless the context otherwise requires” [Securities Act §2(a)(10)]. However not all instruments that are labeled “stock” are securities. The Supreme Court ruled that the definition of a security must indicate “economic reality.” In the 1980s the courts believed that when the majority of a stock…

Mergers & Acquisitions Transactions and Why Expertise is Critical! Forbes Magazine published an article about key considerations in completing a merger or acquisition.  One of those key points is the absolute necessity of using an attorney that specializes in mergers and acquisitions.  That part of the article is worth quoting here. “It is critically important…

When will a general solicitation ruin your ability to rely on Rule 506(b)? Section 4(a)(2) of Rule 506(b) provides a “safe harbor” for companies that comply with certain requirements. In addition to a prohibition from using general solicitation to market securities, the requirements of the exemption include: A company may sell its securities to an…

“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? A term sheet is a document that results from initial negotiations between the business owner and potential investors prior to selling your stock to outside investors.  This is a non-binding…

Let’s see what Section 4(a)(2) of Rule 506(b) says Section 4(a)(2)of Rule 506 (b) provides a “safe harbor” for companies that comply with certain requirements. In addition to a prohibition from using general solicitation to market securities, the requirements of the exemption include: A company may sell its securities to an unlimited number of “accredited…

What is a General Solicitation? A General Solicitation is the act of marketing a capital raise publicly. Rule 506(b) of Regulation D prohibits the use of general solicitation to market securities. (https://www.sec.gov/fast-answers/answers-rule506htm.html) Additionally, Rule 502(c) prohibits: (1) Any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over…

Four principal conditions to a private placement memorandum (PPM) “not involving a public offering” of securities under Section 4(a)(2) and Regulation D, Rule 506; namely: Offeree suitability (investors must be accredited or sophisticated);Availability of material information (all material information about the issuer and its business must be made available to investors);Manner of offering (no general…

General Solicitation A General Solicitation is the act of marketing a capital raise publicly. Rule 506(b) of Regulation D prohibits using this to market securities. This 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…

Do you need a private placement memorandum for a friend and family capital raise? At first blush, you might think that creating a private placement memorandum can be done without an attorney.  All you need to do is talk about the business plan, take the investment money, and then file a Form D with the…

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