Additional SEC Relief is Revealed

Written by Ignacio Celis-Aguirre

On March 26, 2020, the Securities and Exchange Commission (the “Commission”) announced that it would be providing additional temporary regulatory relief to market participants in response to the effects of the Coronavirus Disease 2019 (“COVID-19”). This relief addresses: (1) temporary relief from the notarization requirement for Form ID for certain filers who cannot secure a notarization because of COVID-19; (2) extending the filing deadline for specified Regulation A and Regulation Crowdfunding reports and forms from certain companies unable to file timely reports and forms because of COVID-19; and (3) extending the filing deadline for submitting annual update filings (“Form MA-A”) to Form MA for certain municipal advisors affected by COVID-19. Continue reading “Additional SEC Relief is Revealed”

COVID-19 Causes Coverage

SEC Grants Additional Time For Filings Impacted By COVID-19

Written by Blake Baron

Earlier this month, the U.S. Securities and Exchange Commission (the “SEC”) provided conditional regulatory relief to those public companies impacted by COVID-19 (novel coronavirus) with a 45-day extension to file certain SEC filings that would have been otherwise due between March 1, 2020 and April 30, 2020. The SEC announced today that it was modifying that prior relief to cover certain filings due on or before July 1, 2020. The SEC acknowledged that many companies’ operations continue to be significantly impacted by the ongoing COVID-19 pandemic, which may result in difficulties for those companies to meet their applicable SEC filing deadlines. Continue reading “COVID-19 Causes Coverage”

SEC Sets Course on COVID-19 Disclosure

Written by Blake Baron

Introduction

On March 25, 2020, the SEC’s Division of Corporation Finance provided disclosure guidance to public companies to assist in the evaluation of a company’s disclosure obligations with respect to the COVID-19 (novel coronavirus) pandemic and related business and market disruptions.

While it may be difficult for companies to assess or predict the exact impact of COVID-19 on individual companies or entire industries, the SEC explained that a company may have obligations to disclose certain risks and effects to the extent material to investment and voting decisions. Such risks and effects include the impact of COVID-19 on the current state of a company’s operations, management expectations regarding its future effects, a company’s response to the evolving pandemic and operational plans to address such uncertainties. The SEC noted that disclosure of these risks and COVID-19-related effects may be necessary or appropriate in various sections of SEC filings, including, but not limited to, management’s discussion and analysis, the business section, risk factors, legal proceedings, disclosure controls and procedures, internal control over financial reporting, and a company’s financial statements. Continue reading “SEC Sets Course on COVID-19 Disclosure”

Big Apple, Small Business

New York City Helps Small Businesses Survive

Written by Arina Shulga

With the recent “social distancing” measures that include the closure of schools, bars and restaurants, gyms, libraries, Broadway theaters, large retailers, and other businesses, many companies operating in New York City are being seriously impacted.  Although some bigger companies may survive this economic crisis, small businesses likely face a grim future. Continue reading “Big Apple, Small Business”

Merger Modifications

DOJ and FTC Announce Temporary Modifications to Certain Filing and other Procedures under the Hart, Scott Rodino Act (“HSR Act”) For Pendency of COVID-19 Event

Written By Anthony Adler

On March 13, 2020, the Federal Trade Commission (“FTC”) and the Department of Justice (“DOJ”) announced that they have adopted a series of temporary changes to their civil merger investigation processes, which will remain in place during the pendency of the Coronavirus (COVID-19) event.  These changes will ensure that the DOJ and FTC will be able to continue operations as their employees carry out their duties under a mass telework directive in accordance with health guidance from the CDC, WHO, and other health authorities. These temporary measures include the following: Continue reading “Merger Modifications”

Shareholder Distancing

Shareholder Meetings in the Age of “Social Distancing” and COVID-19

Written by Blake Baron

Background

On March 13, 2020, the U.S. Securities and Exchange Commission (the “SEC”) published guidance to assist public companies, investment companies, shareholders and other market participants affected by COVID-19 in connection with their upcoming shareholder meetings. The SEC explained that this guidance was designed to allow these companies to continue to hold their meetings, including through the use of technology, and engage with shareholders under social distancing circumstances, while still complying with the federal securities laws.

Shareholder Meetings – The Impact of COVID-19 and the Natural Transition to Virtual Meetings

Generally, public companies and investment companies are required to hold annual meetings of security holders, with the federal securities laws requiring the delivery of proxy materials to the voting shareholders.  Over the past few years, more and more companies have been transitioning to either complete “virtual” shareholder meetings or “hybrid” meetings, which avoid the need for in-person shareholder attendance. Continue reading “Shareholder Distancing”

SEC Proposes Rule Changes That Will Enable Entrepreneurs to Raise More Capital at Lower Costs

Commercial industrial construction
Photo Credit: istock.com/z_wei

By Mark T. Hiraide

This week, in a nearly 300-page release, the Securities and Exchange Commission proposed significant changes to its rules applicable to online equity crowdfunding and other securities offerings that are exempt from SEC registration.

These kinds of offerings generally are most advantageous to smaller and emerging companies that have limited funds to spend on raising capital. Last year, exempt securities offerings accounted for an estimated $2.7 trillion (69.2%) of new capital, compared to $1.2 trillion (30.8%) raised through SEC-registered offerings.

If adopted, the proposed changes will enable entrepreneurs to raise more capital through exempt offerings and simplify certain complex rules, thereby reducing legal costs associated with funding a business. The changes also will continue provisions to protect investors, especially individual retail investors. Continue reading “SEC Proposes Rule Changes That Will Enable Entrepreneurs to Raise More Capital at Lower Costs”

SEC Commissioner Hester Peirce’s Provocative Crypto Proposal

Financial technology concept. Fintech. Crypto currency. Electronic money. Cashless payment. Modern Monetary Theory.
Photo Credit: istock.com/metamorworks

By Mark T. Hiraide

In an unusual and courageous move last week, SEC Commissioner Hester Peirce (aka “Crypto Mom”) urged the Securities and Exchange Commission to adopt a rule that would exempt the sale of tokens or cryptocurrencies from most provisions of the federal securities laws. It’s courageous in its scope and unusual because she (and her staff) drafted the proposed rule leaving the SEC few excuses to avoid considering it.

If adopted by the SEC, the rule will allow anyone to conduct initial coin offerings (ICOs) of tokens intended to be used to develop a decentralized or functional network, provided, that “Network Maturity” occurs within three-years. “Network Maturity” is defined by the proposed rule as when the network is either (i) no longer controlled by a single group or (ii) is functional, as demonstrated by the ability of token holders to use tokens for the transmission and storage of value, to prove control over the tokens, to participate in an application running on the network or in a manner consistent with the utility of the network. Continue reading “SEC Commissioner Hester Peirce’s Provocative Crypto Proposal”

Amending the Definition of “Accredited Investor”

Employee in office
Photo Credit: istock.com/shironosov

By Arina Shulga

The definition of an “accredited investor” is the cornerstone of Regulation D that provides a safe harbor exemption for private placements of securities by startups and more mature companies. Only in 2018, $1.7 trillion was invested into the startup sector by means of Regulation D offerings, out of which $228 billion was raised by companies rather than investment funds. Nearly all of the investors in such offerings were accredited. Now, the definition of an accredited investor may be changing to include new categories of people. This will open the extremely risky but yet extremely lucrative startup investment opportunities to more participants.

This blog focuses on certain proposed changes to the definition as it relates to natural persons.

The definition of “accredited investor” came about in 1982 together with the adoption of Regulation D (although the concept of an “accredited person” was first introduced by Rule 242 in 1980). The following categories of natural persons are deemed to be accredited: Continue reading “Amending the Definition of “Accredited Investor””

Legal Perspective on Running a Successful Crowdfunding Campaign

Flat design style web banner for investments in knowledge, student loans, scholarships
Photo Credit: istock.com/Varijanta

By Arina Shulga

Although Regulation Crowdfunding (or Reg CF in short) is a great way to get funding for companies that otherwise would have been overlooked by angel or VC investors, running a successful and compliant Reg CF campaign is not an easy undertaking. Based on experience working with Reg CF issuers, in this blog I describe and discuss three key legal challenges that all Reg CF issuers should know about: restriction on advertising, hiring promoters, and putting together a complete and accurate Form C.

First, the issuer cannot generally solicit and advertise its Reg CF offering. All communications must be done through the portal. According to Rule 204 of Reg CF, the issuer can make factual statements and then direct potential investors to its page on the portal. Such factual statements are limited to the following information: the fact that the issuer is conducting a Reg CF offering; the terms of the offering (amount, nature of securities, price, and closing date), and factual business information about the issuer. While the first two categories are straight forward, issues can arise when talking about the factual business information. Such information cannot include predictions or opinions and must be limited only to facts, such as name, address, website of the issuer and a brief factual description of its business. Continue reading “Legal Perspective on Running a Successful Crowdfunding Campaign”