SEC Commissioner Hester Peirce’s Provocative Crypto Proposal
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”
New Executive Order Addresses E-Commerce and Counterfeit Goods
On January 31, 2020, President Trump issued Executive Order 13904 (“EO”) entitled “Ensuring Safe & Lawful E-Commerce for U.S. Consumers, Businesses, Government Supply Chains, and Intellectual Property Rights.” It begins by stating that e-commerce is “being exploited by traffickers to introduce contraband into the United States, and by foreign exporters and United States importers to avoid applicable customs duties, taxes and fees.” The types of malfeasance cited are counterfeit goods, narcotics (specifically synthetic opioids, such as fentanyl), and other contraband, plus, of course, protection of the revenue. The focus of the EO is on express consignment operators, carriers, hub facilities, international posts, customs brokers and e-commerce platform operations (the “Regulated Parties”). Anyone who participates in the “introduction or attempted introduction” of parcels containing contraband can be held accountable with accountability taking the form of both civil and criminal consequences, as appropriate. The EO goes on to state that CBP’s suspension and debarment procedure will form the framework through which these actions will be carried out. Suspension and debarment apply in the context of doing business with the government, such as government contracts, subcontracts, grants, loans and other assistance programs.
Continue reading “New Executive Order Addresses E-Commerce and Counterfeit Goods”
New Travel Restrictions for New Yorkers
Department of Homeland Security Suspends New York Residents From Enrolling in Global Entry and Other Trusted Traveler Programs
By Benjamin Lau and Susan Kohn Ross
New York residents may no longer be able to enroll (or re-enroll) in Global Entry and other Trusted Traveler Programs, according to recent action by the Department of Homeland Security (“DHS”).
On February 5, 2020, Acting Homeland Security Secretary Chad Wolf announced DHS was suspending enrollment in Global Entry, NEXUS, SENTRI, and FAST for all New York state residents. This announcement does not affect residents of other U.S. states and jurisdictions who may continue to use, enroll or re-enroll in these programs. No information was provided regarding how long the suspension would be in effect, although the way the DHS letter to New York state officials was worded makes it seems further discussions between DHS and those officials may be possible. The stated reason for the restriction is New York’s denial of access to DHS of its Department of Motor Vehicle data for immigration enforcement and criminal history/involvement purposes. An open question remains as to whether grounds exist to bring court action or some other form of legal challenge given DHS invoking law enforcement considerations as the basis for its actions. Continue reading “New Travel Restrictions for New Yorkers”
USCIS Releases New Form I-9, Effective Today
By Benjamin Lau and Frida Glucoft
On January 31, 2020, the USCIS issued a new Form I-9, Employment Eligibility Verification with edition date 10/21/2019. The form is effective immediately. The new Form I-9 is available on the USCIS website at https://www.uscis.gov/i-9.
The form includes the following updates:
Revisions related to the List of Acceptable Documents on Form I-9:
- Added the Consular Report of Birth Abroad (Form FS-240) to List C. Employers completing Form I-9 on a computer will be able to select Form FS-240 from the drop-down menus available in List C of Sections 2 and 3. E-Verify users will also be able to select Form FS-240 when creating a case for an employee who has presented this document for Form I-9.
- Combined all the certifications of report of birth issued by the Department of State (Form FS-545, Form DS-1350, and Form FS-240) into selection C #2 in List C.
- Renumbered all List C documents except the Social Security card. For example, the employment authorization document issued by the Department of Homeland Security on List C changed from List C #8 to List C #7.
Continue reading “USCIS Releases New Form I-9, Effective Today”
IRS Penalties Assessed Against Your Client May Not Be Valid
Written by Robin C. Gilden
Internal Revenue Code section 6751(b) provides that no penalty shall be assessed under the Code unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination, or such higher level official as the Secretary of the Treasury may designate. This section defines penalty as any addition to tax or any additional amount. The requirement for prior written approval does not apply to penalties for failure to file a return or pay tax, or to penalties that are automatically calculated through electronic means, but does apply to negligence and substantial understatement penalties, as well as the “responsible party” penalty for failure to withhold or remit payroll taxes.
Continue reading “IRS Penalties Assessed Against Your Client May Not Be Valid”
China – U.S. Phase 1 Deal: Is It Enough?
China and the U.S. signed the so-called Phase 1 deal on January 15, 2020. Much has been said in the general press and elsewhere about this deal. What does it really accomplish for international traders?
First, there is nothing said about the tariffs imposed by either the U.S. or China. White House briefers did say the tariff on the goods on List 4A would be reduced soon, and a pre-publication version of the proposed Federal Register notice was published on January 16, 2020. It can be found here. Those tariffs will be reduced from 15% to 7.5% on February 14, 2020. When it came to the tariffs China has imposed, no one has any idea what specifically will happen, only that given the commitments made by China, those tariffs will have to come down. Exactly when is anyone’s guess. Continue reading “China – U.S. Phase 1 Deal: Is It Enough?”
Tax Act Simplifies the Private Foundation Excise Tax on Investment Income
Written by David Wheeler Newman
Tax legislation that was included in the massive spending bill signed by the President included provisions affecting the charitable sector. We previously reported on one provision involving the reviled nonprofit parking tax and on another provision granting temporary tax benefits for donations targeting disaster relief. Another provision will be good news for private foundations and their advisors.
Continue reading “Tax Act Simplifies the Private Foundation Excise Tax on Investment Income”
Amending the Definition of “Accredited Investor”
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
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”
Unlimited Liability for New York Business Owners
By Arina Shulga
One of the main benefits afforded to a corporate structure is the limited liability protection for its owners. This means that the corporation and its shareholders are treated as separate legal entities and it is the corporation’s assets, and not the assets of its individual shareholders, that are available to pay for judgments and claims of creditors.
In certain limited circumstances such as fraud, disregard for corporate formalities, and inadequate capitalization, the limited liability shield can be “pierced” by the courts to hold the corporation’s shareholders personally liable for the corporation’s debts and other obligations. Such “piercing” of the corporate limited liability shield is a prevalent practice in most if not all states. Continue reading “Unlimited Liability for New York Business Owners”
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