Category: Broker-Dealers

New York’s Blue Sky Securities Laws – A Primer for Startups and Other Issuers by Michael Stanczyk

Accredited Investors, Angel Investors, Broker-Dealers, Crowdfunding, Financing Your Business, Investors, Private Placements, Securities, Stock, Venture Capital

3d blue sky bookAs a younger lawyer I was regularly working on securities offerings.  For the bulk of the offerings they were private placements to accredited investors under SEC Rule 506(b), which involved filing a Form D and state notice filings.  In most states it was pretty straightforward. New York, however, was not straightforward then, and still remains a mystery to many people.  Over the years I searched for a book that covered the basics of New York’s Martin Act (the law covering securities offerings in the State), but never found exactly what I was looking for.  I kept working on deals and writing posts for this blog (in addition to memos and white papers, etc.), and over time I compiled a decent amount of information and knowledge of the subject and decided to put it all into one place.  Next thing you know I had the beginnings of a book.  Link to see it on Amazon here.

Now I don’t profess to being a specialist in the field of securities, as there are many complexities and rabbit holes to go down if you get outside the more “vanilla” type offerings. Startups, emerging companies and even investment funds, however, generally are raising money through private placements under SEC Rule 506(b). This book gives the basics and is, like its titled, a primer.  I tried to walk a fine line to allow it to be read by non-lawyers, with enough citations to assist legal practitioners.

Admittedly, this book is a niche product.  The prospective audience is those whose companies are looking to raise money, or individuals otherwise involved in some aspect of companies raising money.  I hope it can be helpful to such individuals, including younger attorneys just getting started in the field.

In any event, the book is for sale in paperback and e-book on Amazon.   I personally feel the paperback is easier to read and to flip back and forth to things, and to view the exhibits and addenda, which should be consulted. I have a number of copies of the book, and if any friends and colleagues of mine (which I knew prior to this post) would like a free copy , feel free to reach out.  Thanks for the support.

Funding Portal Rules for Regulation Crowdfunding a/k/a Equity Crowdfunding

Broker-Dealers, Crowdfunding, Financing Your Business, Investors, Stock, Uncategorized

The JOBS Act from way back in 2012, set forth the Crowdfunding exemption to the securities laws, and required that any Funding Portal that engaged in Crowdfunding registered with the SEC and became a member of FINRA.  In late 2015, the SEC came out with the Regulation Crowdfunding Final Rules and forms to permit companies to offer and sell securities through Crowdfunding and to regulate the intermediaries which can sell the crowdfunded securities.  The latest Funding Portal rules have been finalized by the SEC and FINRA. Read more

Equity Crowdfunding a/k/a Regulation Crowdfunding Coming Soon (May 16, 2016) to a Startup Near You

Broker-Dealers, Crowdfunding, Financing Your Business, Investors, Stock

The SEC’s Final Rules for Regulation Crowdfunding were published on October 31, 2015, and are  considered effective 180 days after such publication.  Meaning that on May 16, 2016, Regulation Crowdfunding will be a go.

On that date, a company will be able to raise money under the new rules and file Form C (which still does not appear on the SEC’s Form Page).

To get a head start prior to the final rules allowing sales, and to catch up to broker-dealers who can also act as intermediaries and sell securities through the Regulation Crowdfunding final rules, Funding Portals were allowed to begin registering with the SEC on January 29, 2016, by filing the Form Funding Portal, among other things.

I’ve blogged on this before (here and here) and will be doing a number of posts solely on Regulation Crowdfunding in the near future to make sure that the basics are covered and will dig into some advanced topics.

Anyone company looking to take advantage of the new rules should start getting its house in order, by preparing its financials, its legal structure and investigating which intermediary it wishes to use for the sale of its shares, whether a broker-dealer or a funding portal.

After a further review of the new Regulation Crowdfunding rules I think they exemption provided may best serve companies looking to raise smaller amounts, such as below $500,000 (to avoid the audited financial requirement), or who are raising equity capital for the first time.  There is a huge need for smaller companies to get access to capital.   The Regulation Crowdfunding rules may allow investments to happen which otherwise wouldn’t, which is what Congress intended by passing the JOBS Act to modernize the antiquated securities laws.  Companies that can attract accredited investors will likely continue to rely on the private placement exemption under Rule 506(b) due to its relative simplicity compared to other offerings. But again, I do think the Regulation Crowdfunding rules have a specific subset of issuers that can benefit from them.

JOBS Act Broker-Dealer Registration Exemption

Broker-Dealers, Crowdfunding, Financing Your Business, Finders, Investors, Securities, Stock, Venture Capital

The JOBS Act contained many provisions which were aimed at making the capital raising process easier, simpler and quicker from a host of angles.  Many things promised in the JOBS Act will not come to fruition until the SEC promulgates the regulations on the specific topic.  Some of these are equity crowdfunding, and the ability for issuers to use general solicitation in Rule 506 offerings.

One of the things contained in the JOBS Act which went into effect immediately, was an exemption for broker-dealer registration for persons or entities acting as brokers in certain 506 offerings.  The SEC just confirmed this in a recent FAQ available here.  I’ll give a quick overview below. Read more

To Register or Not to Register?: Broker-Dealers and Finders

Accredited Investors, Broker-Dealers, Financing Your Business, Finders, Investors, Private Placements, Securities, Stock, Venture Capital

If you are involved in a startup you undoubtedly have heard about the company’s need to raise money. If you’ve gone the regular route you may be funded by institutional investors, like an angel or VC fund. The company may also have raised money through a private placement by selling equity to investors directly or through brokers.

You may have heard of another type of person involved in the capital raising process called a “finder”.   Everyone has heard of the term a “finder’s fee” which is known to be about 10% of the overall transaction.   The concept is the same with startup financing or M&A activities, although who can qualify as a finder and how they can be compensated has been a big deal with the SEC in the last couple years.  The real issue is when anyone can act as a finder, and if they really should be registered with the SEC as a broker-dealer. Read more