Jobs Act 101Regulation Crowdfunding for Intermediaries
Regulation Crowdfund provides for two types of intermediaries, the registered broker-dealer and the funding portal. Broker-dealers do not need to register in order to engage in crowdfunding offerings, but their activities in this area are governed by Regulation Crowdfunding. Funding portals must register with the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
Issuer Interests By Intermediaries
Regulation Crowdfunding as proposed prohibits any intermediary from holding a direct or Read More
Crowdfunding 101 Q & A
On October 23, 2013, the Securities and Exchange Commission (the “SEC”) proposed Regulation Crowdfunding, setting forth the rules governing the offer and sale of securities through crowdfunded offerings, pursuant to Title III of the Jumpstart Our Business Startups Act (the “JOBS Act”).
Within days, FINRA published its proposed rules for the licensing and regulation of “funding portals.” The recent SEC and FINRA proposals have spurred an interest in crowdfunded
securities offerings. This blog post discusses the most common questions we receive about crowdfunding.
Q. Which companies will be able to engage in equity crowdfunding?
A. US companies that are not subject to the SEC’s reporting requirements will be eligible to rely on the crowdfunding exemption from registration. Both registered and exempt investment companies will not be eligible. Additionally, companies may be disqualified under Rule 503, which includes, among other things, certain designated “bad actor” disqualifications. Companies that have no specific business plan, or companies whose sole business plan is to engage in a merger or acquisition with another company, cannot use crowdfunding. Read More
What Causes a DTC Chill? Going Public Lawyers
The Depository Trust and Clearing Corporation (“DTCC”), through its subsidiaries, provides clearing, settlement and information services for securities. DTCC’s subsidiary, the Depository Trust Company (“DTC”) was created to improve efficiencies and reduce risk in the clearance and settlement of securities transactions. Not all securities are eligible to be settled through DTC and issuers must satisfy the criteria set by DTCC to be settled through DTC. All public companies- SEC reporters and non-reporters alike- are subject to these rules. Once they qualify, they must continue to meet DTC standards in order to maintain eligibility.
Meeting these criteria- once relatively simple- has become increasingly complicated in recent years. It can be an unexpected legal and compliance cost for many issuers, and a challenge for SEC attorneys not familiar with DTC procedures. Read More
SEC Registration & the Emerging Growth Company
The JOBS Act makes it easier for issuers who qualify as an emerging growth company to go public direct by exempting them from certain federal securities regulations, by reducing certain SEC reporting requirements. The JOBS Act creates a new category of “emerging growth company” which is defined as a company with annual gross revenues of less than $1 billion during its most recently fiscal year.
The definition does not exclude foreign private issuers. Emerging growth companies will maintain their status as such until the earlier of:
♦ The last day of the first fiscal year during which the emerging growth company had annual gross revenues of $1 billion or more.
♦ The last day of the first fiscal year following the fifth anniversary of the emerging growth company’s direct initial public offering.
♦ The date on which the emerging growth company has, during the previous three-year period, issued more than $1 billion in non-convertible debt.
♦ The date on which the company is deemed to be a large accelerated filer. Read More
The Securities Exchange Act of 1934
The Securities Exchange Act of 1934 (the “Exchange Act”) grants broad authority to the Securities and Exchange Commission (“SEC”) to oversee the securities industry. The SEC’s authority includes the power to register, regulate, and overseebrokerage firms, transfer agents, and clearing agencies; as well as securities self regulatory organizations (SROs), including the Financial Industry Regulatory Authority (“FINRA”).
In addition, the New York Stock Exchange, the NASDAQ Stock Market, and the Chicago Board of Options Exchange are all subject to regulation under the Exchange Act. The Exchange Act addresses certain conduct in the securities markets and provides the SEC with the power to discipline regulated entities and persons associated with them. It also grants the SEC the ability to regulate disclosures of public companies, such as the authority to require periodic reporting of information by companies with publicly traded securities. Read More