Category: Securities Act Compliance

Regulation A+ May Become Available To SEC Reporting Issuers

Christopher L. Doerksen

On September 5, 2017, the U.S. House of Representatives overwhelmingly passed (by a vote of 403-3) the Improving Access to Capital Act. The Act directs the SEC to amend Regulation A+ to allow SEC reporting issuers to use Regulation A+ when raising capital, and to deem their SEC periodic reports to satisfy the periodic and current reporting requirements of Tier 2 of Regulation A+. The...

SEC Warns That ICOs and Other Internet Token Sales May Be Securities Offerings Subject to Federal Securities Laws

Whitney Holmes

On Tuesday, July 25, as many practitioners probably expected, the SEC issued a warning that offers and sales of digital assets (virtual coins or tokens) by organizations using blockchain or distributed ledger technology (often referred to, among other things, as Initial Coin Offerings (“ICOs”) or Token Sales) are subject to the requirements of the federal securities laws. Depending on the offering, investors may use an...

Stock Transfer Restrictions Should Be Conspicuously Noted, Delaware Chancery Court Opinion Reminds Issuers

Cam C. Hoang

In Henry v. Phixios Holdings, Inc., C.A. No. 12504-VCMR,the Delaware Court of Chancery held that pursuant to Section 202 of the General Corporation Law, in order for a stockholder to be bound by stock transfer restrictions that are not “noted conspicuously on the certificate or certificates representing the security,” he must have actual knowledge of the restrictions before he acquires the stock. If the stockholder...

All Issuers Eligible to Confidentially Submit Draft IPO Registration Statements

Steven Khadavi

One of the more utilized provisions of the Jumpstart Our Business Startups Act (JOBS Act) has been the confidential submission of IPO registration statements by Emerging Growth Companies (EGCs) to the Securities and Exchange Commission. The nonpublic nature of the SEC review process has allowed EGCs to submit IPO registration statements and respond to SEC comments outside the public eye and without having to alert...

SEC Charges CEO with Failing to Disclose Perks to Shareholders

Cam C. Hoang

Companies frequently wrestle with perks in their proxy executive compensation disclosure. Whether an item constitutes a perk often requires judgment based on the facts and circumstances,¹ and disclosure may elicit intense, public scrutiny over what amounts to a relatively small percentage of an executive’s total compensation package.² From time to time, the SEC issues a cautionary tale that perks need to be accounted for and reported...

SEC Issues Final Rules to Make JOBS Act Inflation Adjustments and Amendments to Forms and Rules to Accommodate Emerging Growth Companies

Jason Brenkert

On March 31, 2017, the Securities and Exchange Commission (SEC) issued final rules regarding inflation adjustments and other technical amendments under Title I and III of the Jumpstart Our Business Startups (JOBS) Act. Under the inflation adjustments, the SEC adjusted the gross revenue threshold for an issuer to lose its status as an Emerging Growth Company (EGC) from $1.0 billion to $1.07 billion, a $70...

The Danger of Paying Finder’s Fees to Unregistered Broker-Dealers

Kenneth G. Sam

We get asked from time-to-time whether it is advisable for issuers to pay fees to unregistered “finders” for introducing potential investors in the United States to the issuer in connection with securities offerings. The short answer is “no.” Most finders are engaged by issuers under finder’s, advisory, or other arrangements, which typically require payment of “success fees” upon completion of a financing transaction. While these...

SEC Adopts T+2 Settlement Cycle

Jason Brenkert

On March 22, 2017, the Securities and Exchange Commission adopted an amendment to Rule 15c6-1(a) to shorten by one business day the standard settlement cycle for most broker-dealer securities transactions.  Currently, the standard settlement cycle for these transactions is three business days, known as T+3.  The amended rule shortens the settlement cycle to two business days, T+2. The amended rule will take effect on September...

Senate Banking Committee Focused on Deregulation

Jason Brenkert

On March 9, 2017, the Senate Banking Committee passed a series of four bills focused on deregulation, including one that would make it easier for privately held companies to issue stock awards through equity compensation plans. Each of the bills was a bipartisan effort. One bill eases certain restrictions on reporting on exchange traded funds (ETFs). The bill would address securities laws and regulations that...

SEC Endorses Use of Conditional Offers to Buy Shares in IPOs

Jonathan B. Abram

The SEC recently issued a no-action letter to Morgan Stanley that will streamline the process for its wealth management clients to participate in IPOs. The SEC said it would not object to Morgan Stanley’s proposed use of conditional offers to buy shares (“COBs”) prior to the effectiveness of IPO registration statements under specific conditions. The no-action request and the SEC’s letter confirm that COBs, if...