New QuetzalHiloco Publication

Our client, QuetzalHiloco Publishing, released a new work over Christmas: T. H. Chalm’s Rhyming Redsong: Matthew.  They have made a free e-version available here, and this also is available for purchase through Amazon.

The Unknown Unknowns of SEC Law

Rule 506(b) vs. Rule 506(c)

My client, Canis Major Incubator, produced this webinar with my assistance.

Blog Archive

Securities Law and Cryptocurrencies

Securities Law and Cryptocurrencies (Editor’s Note: This article was written with the invaluable assistance of Mr. Rane Riley, a third-year law student at Southern Methodist University’s Dedman School of Law, my alma mater.) Anyone paying attention to world news headlines has witnessed the recent meteoric rise in the value of Bitcoin, a cryptocurrency (or virtual currency) […]

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Take a Knee

Take a Knee   The US Supreme Court has held that First Amendment rights may be waived upon clear and convincing evidence that the waiver is knowing, voluntary and intelligent. D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 185, 187, 92 S.Ct. 775, 782, 783, 31 L.Ed.2d 124 (1972). So, it is possible for […]

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Regulation D Rule 501(a)(8) Inquiry

Regulation D Rule 501(a)(8) Inquiry A potential client asked me whether their LLC would be deemed to be accredited under Regulation D Rule 501(a)(8) (“[a]ny entity in which all of the equity owners are accredited investors”) if the only members of the LLC were the client (an individual) and his mom (also an individual)?  His […]

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Raise $5 Million From Non-Accredited Investors Under Amended Rule 504

Raise $5 Million From Non-Accredited Investors Under Amended Rule 504 On October 26, 2016, the SEC adopted final rules amending Rule 504 of Regulation D under the Securities Act of 1933, as amended (the “Act”). This amendment to Rule 504 was effective January 21, 2017, and the repeal of Rule 505 (described herein) was effective […]

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Rule 506(b) Information Delivery Requirements to Non-Accredited Investors

Rule 506(b) Information Delivery Requirements to Non-Accredited Investors As we know, Regulation D of the United States Securities Act of 1933, as amended (the “Act”), provides exemptions from the Act’s securities registration requirements, most notably, the registration exemptions found in Rule 506: Rule 506(b) and Rule 506(c).  Many people get very excited when they learn […]

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Section 4(a)(7)’s Private Securities Resale Exemption

As a crowdfunding attorney, most of my attention has been focused on the US federal JOBS Act, the new federal legislation that President Obama signed into law in 2013, the final rules of which only went into effect in 2016. Another significant, recent amendment to the federal securities laws was enacted on December 4, 2015 […]

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The Best Free Legal Advice You Will Receive Today

I was present at the death of my stepfather, Richard, on February 28, 2017, and his passing has impacted me greatly.  I know Rich’s wife (my mom) has been affected by his passing even more than me. Rich experienced a stroke in October 2016 that left him with aphasia, the inability to speak or verbally […]

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What information do I need to form an LLC?

This is a frequently asked question that I thought would be useful to answer here. For your Texas LLC, we will need you to pick a name.  The more unusual the name, the better it is from an availability standpoint, but simplicity is equally as important because you will be transacting business in the name of the […]

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"Do I need to register as an investment adviser?" Part 2

In Part 1 of this article discussing real estate syndicators’ obligations under the investment adviser laws, I provided you with the not-so-good news that the SEC and the state securities regulators really do want managers and general partners to real estate investment funds to register as investment advisers even though they are “only” providing advice […]

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Rule 506(b)'s "sophistication" standard

If you read Rule 506(b) under Regulation D, you won’t find the word “sophisticated.”  The rule specifies that each of your investors that is not “accredited” must “have such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, or the issuer reasonably believes immediately […]

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When are debt instruments considered securities?

I have been needing to research this issue for a while, and found this excellent article. “[U]nder the controlling U.S. Supreme Court ruling (Reves v. Ernst & Young, 110 S.Ct. 945 (1990)), federal law also sets up a rebuttable presumption that a promissory note with a maturity greater than nine months IS a security (as the […]

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"Do I need to register as an investment adviser?" Part 1

(Editor’s Note: This is Part 1 of a two-part article, with Part 2 at this link.) Texas and United States federal law requires that any person who for compensation gives advice with respect to securities is obligated to register as an investment adviser, either with the state securities regulator of the state where the adviser has its […]

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The SEC's Evolving Integration Doctrine

“Integration” is the SEC’s term for treating two or more securities offerings as a single offering. For example, an issuer theoretically could rely on the exemption found in Rule 506(c) and the exemption under Regulation A, and simultaneously conduct separate offerings relying on two different exemptions. This is a great article discussing how the SEC’s integration rules […]

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How would you like $2.5 million to invest in real estate?

As we all know by now, the Jumpstart Our Business Startups Act (the “JOBS Act”) created new exemptions not only from the registration requirements of the Securities Act of 1933, as amended, but also from the reporting requirements under the Exchange Act of 1934, as amended. These reporting requirements require issuers to file regular 8Ks, […]

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Selling Private Securities To Foreign Investors

A client recently asked whether a foreign (i.e., non-U.S.) person could invest in private securities offered by a United States domestic issuer (such as a Texas limited liability company).  In this context, “private” securities are securities sold and issued to an investor under an exemption from the registration requirement of the Securities Act of 1933, […]

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Escrow Services For Crowdfunding Transactions

It [almost] goes without saying that issuers of private securities in any equity financing transaction must address each step of the transaction in detail.  This is true whether the financing is crowdfunded or whether it is distributed using more traditional means.  One such important detail is how investment proceeds are paid to the issuer.  (If […]

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Texas issuer exemption

Rule 139.19 is a uniform exemption from the securities registration requirements of the Act for the sale of securities by an issuer to accredited investors. The exemption is not available to an issuer that is in the development stage that either has no specific business plan or purpose or has indicated that its business plan […]

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New York issuer exemption

More of a placeholder for me now, but so far I have covered Texas, California, Florida, and New York.  Name the next state in the comments! Issuers must use brokers for Rule 506(c) offering?

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California issuer exemption

In our continuing series of state law provisions exempting issuers from selling their own securities, we visit California!  California Administrative Code (10 CCR Section 260.004.1) adopts the US federal issuer exemption under Rule 3a4-1 of the Exchange Act. “The term “broker-dealer,” as defined in section 25004 of the Corporate Securities Law of 1968, does not […]

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Florida Rule 506(c) offerings and selling through a dealer

Here is a long post about Florida and private Rule 506(c) offerings in my ongoing series about whether you must use a broker-dealer to sell securities in a Rule 506(c) offering.  For new readers, remember that issuers of securities must abide by both US federal and state securities laws. Regarding the registration rules, Florida does […]

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Texas Finder registration guide

I almost hesitate to talk to people about being finders in Texas, because according to one Texas State Securities Board regulator, the list of registered finders in Texas is the TSSB’s “hunting ground”.  After that caveat, if you still want to be a finder in Texas, please see this handy Texas Finder Registration guide.  As always, call with […]

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Attorneys accepting transaction-based compensation

In an SEC Order Instituting Cease-and-Desist Proceedings, California attorney Mark A. Ivener agreed to disgorge transaction-based compensation that he had received in connection with referring clients to an EB-5 Regional Center.  Interesting to me, the Order provides that “[w]hile some of Respondents’ activities overlapped with legal services, for which they earned fees, Respondents earned transaction-based compensation for […]

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Issuers must use brokers for Rule 506(c) offering?

https://crowdfundattny.com/2016/06/17/can-a-crowdfunding-issuer-sell-its-own-securities/comment-page-1/#comment-5407 Mark Roderick is an expert in this area, but I do question some of his assertions in my comments to his article.  It sounds like he is saying that because of the ability to use advertising with Rule 506(c) offerings, issuers no longer can sell their own securities (without using a broker).  He suggests […]

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How to comply with state-level securities laws for a Title III Offering?

For offerings conducted under Securities Act Section 4(a)(6) (i.e., the “crowdfunding” exemption), the JOBS Act amended Section 18(b)(4) of the Securities Act to add to the list of covered securities for which preemption applies, securities that are the subject of crowdfunding offerings exempt under Section 4(a)(6) of the Securities Act.  At the federal level, the […]

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What is an “Issuer”?

What is an “Issuer”? An “issuer” is any “person” who sells and issues its own securities.  A common example is a corporation that sells its stock to investors to raise money to fund its business operations.  If a corporation owned stock in another company, it could theoretically sell that stock to raise money to fund […]

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What is a “Security”?

What is a “Security”?  Under US federal securities laws, the definition of a “security” is derived from the “economic realities” test first espoused by the U.S. Supreme Court in 1946 in the case, SEC v. W.J. Howey Co., 328 U.S. 293. Under the Howey Test, an economic interest in a business will be classified as […]

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What Is An Accredited Investor?: Part 1

What Is An Accredited Investor?: Part 1 “Accredited investor” is term used in the US federal securities laws specifically in connection with the sale and issuance of private securities pursuant to a regulatory exemption under the Securities Act of 1933.  The regulatory exemption is known as “Regulation D” and is found at 17 C.F.R. § […]

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What Are Private Securities?

What Are Private Securities?  Section 5 of the United States federal Securities Act of 1933 generally provides that it is unlawful for any person to sell its securities unless there is a “registration statement” in effect.  The process of filing a registration statement with the SEC is long, arduous, and expensive.  At the end, your […]

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Using Advertising To Sell Your Securities

Using Advertising To Sell Your Securities  It truly is an exciting time to be a securities lawyer.  In the past, advertising has been prohibited in connection with any offer and sale of private securities.  To unpack the significance of that statement, you have to understand what private securities are, and then also understand how the […]

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