SEC Offers an Elixir for Small Businesses Feeling the Financial Effects of COVID-19

Written by Mark T. Hiraide

In response to the ill effects the coronavirus pandemic is having on business, the Securities and Exchange Commission on May 4, 2020 adopted a temporary final rule to make it easier for existing businesses to raise up to $250,000 through Regulation Crowdfunding.

Under the relaxed rules, which are in effect only until August 31, 2020, a business is excused from complying with the Regulation Crowdfunding requirement to have its financial statements reviewed by an independent public accountant. During this limited period, the SEC is requiring only certain information from the business’ Federal income tax returns certified by the principal executive officer. That represents a significant time and financial savings for companies – especially small businesses – that need a quick infusion of capital during rough times caused by the COVID-19 virus. Continue reading “SEC Offers an Elixir for Small Businesses Feeling the Financial Effects of COVID-19”

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”

New Federal Act Amending Dodd-Frank Also Seeks to Help Startups

business concept money of glass and growht small tree
Photo credit: iStock.com/lovelyday12

By Mark Hiraide & David Gordon

In late May, President Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act. Although the president and many Republican members of Congress had threatened to repeal and replace Dodd-Frank, the new law’s actual changes are relatively minor. The new law rolls back some of the post-financial crisis legislation enacted in 2010, particularly for smaller community banks and credit unions. But it largely leaves intact the core framework of Dodd-Frank.

Less publicized but worthy of attention is the new law’s Title V—Encouraging Capital Formation, which amends the Securities Act of 1933 and Investment Company Act of 1940 with regard to early stage companies. Like the amendment to Dodd-Frank, the new law’s amendments to the federal securities laws are modest.  Continue reading “New Federal Act Amending Dodd-Frank Also Seeks to Help Startups”