SEC’s Sunshine Act Meeting

Seal of the U.S. Securities and Exchange Commi...
Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Sunshine Act Meeting.

Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94-409, that the Securities and Exchange Commission will hold an Open Meeting on Wednesday, October 23, 2013 at 10:00 a.m., in the Auditorium, Room L-002.

The subject matter of the Open Meeting will be:

  • The Commission will consider whether to propose rules and forms related to the offer and sale of securities through crowdfunding pursuant to Section 4(a)(6) of the Securities Act of 1933, as mandated by Title III of the Jumpstart Our Business Startups Act.

The duty officer has determined that no earlier notice was possible.

At times, changes in Commission priorities require alterations in the scheduling of meeting items.

For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact:

The Office of the Secretary at (202) 551-5400.

Elizabeth M. Murphy
Secretary

Dated: October 21, 2013

 

http://www.sec.gov/news/openmeetings/2013/ssamtg102313.htm

 

 

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SEC Extends Comment Period for Section 506 Reg D Advertising Rules

Washington, DC – The Securities and Exchange Commission extended the public comment period for proposed, new rules that would govern how businesses can advertise equity offerings to accredited investors under Rule 506 Regulation D.

SEC

SEC

On July 10, 2013, the SEC issued rules that would lift the ban against general solicitations for Rule 506 Regulation D offering as mandated by Title II of the Jumpstart Our Business Startups Act.  The new rules lifted the ban effective September 23, 2013; however, the SEC also proposed for public comment additional rules that would regulate general advertising for Rule 506 offerings.

The comment period for the new rules closed on September 23, 2013, but on September 27, 2013, the SEC said it will reopen the public comment period.

Rule 506 exempts business from registering their securities with the SEC if they are offering and selling their equity only to “accredited investors” under Rule 501 of Regulation D. On July 10, 2013, the SEC also proposed, newadditional rules for public comment that would add restrictions to general solicitations.  The SEC’s new proposals would:

1.   Require the filing of a Form D no later than 15 days in advance of a general solicitation followed by a closing Form D amendment 20 days after the Rule 506 offering. The Crowdfund Intermediary Regulatory Advocates (CFIRA) commented to the SEC that the proposal is  ”inconsistent with the principles of the JOBS Act for general solicitation and advertising.”

2.  Require the placement of  a legend — that is, a disclaimer that the advertising is offering a private placement of securities — with any advertising. CFIRA noted that such a proposal would make it impossible to use services such as Twitter to make an offering.

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Angel Investors Share Concerns With SEC Ahead Of General Solicitation

Angel Investors Share Concerns With SEC Ahead Of General Solicitation

inShare6September 19, 2013 @ 10:18 am By

securities and exchange commission secYesterday the SEC held a meeting of top advisors and staff to discuss the latest rulemakings and initiatives from within the Commission. The Angel Capital Association was invited to speak on a new rule to go into effect on September 23rd that lifts the ban on general solicitation for private placement offerings under new Rule 506(c) of Regulation D.

Angel investors have been vocal about their concerns regarding certain elements of this new rule…

The SEC needs to recognize the power of angels, and the value chain of funding a company from startup to successful exit. The SEC needs to protect angels with safe harbors against 506c. The SEC needs to continue preserving the self-certification of accreditation in 506b. And the SEC needs to maintain the current levels of income and wealth for accreditation without onerous and unnecessary requirements – including third parties. Only these actions will allow the Jumpstart Our Business Startups (JOBS) Act to achieve its intended goals – to make it easier for companies to gain funding, and create more high paying jobs.David Verrill, WSJ Op-Ed, July 2013

acaSelf accreditation provides a fast and easy way for angel investors to self-certify without having to expose specifics regarding their income and/or net worth. At one point some within the ACA were calling this verification standard an “angel killer,” but that stance has since softened based on language in the rule allowing for “principles-based verification.” The ACA has issued their own guidance on verification standards.

The topic of pitch events was also discussed prominently, as William Carlton explained on his Counselor @ Law blog

The most dramatic moment of the meeting yesterday was when Catherine Mott, a member of the advisory group, former Chair of the ACA, and angel investor, asked the staff whether demo days and pitch events – common features of today’s startup financing ecosystem, ostensibly okay in the past under old 506 – constituted general solicitation.

This issue will resonate deeply with the startup community, many of whom have arguably been generally soliciting their offerings for years via various demo days and pitch events. This exact issue was recently included in a notice filed against Candace Klein by the State of Ohio, a move that seemed unfair considering the proliferation of these types of activities within the greater startup ecosystem. It led Charles Sidman to question whether the State of Ohio was participating in “selective enforcement.”

Historic Change in General Solicitation Law That Goes Into Effect Monday

jobs_actAn 80-year-old ban that has prevented private companies from publicly advertising their efforts to raise funds will lift on Monday.

If you are an entrepreneur struggling to find investors, that may be very good news. But hold the champagne for now.

What this historic change in general solicitation law really means is that if you are an entrepreneur looking to raise money from investors, you might want to spend some quality time with a lawyer before you go shouting it from the rooftops.

That’s because the Securities and Exchange Commission is expected on Monday to release further guidance on how it will regulate the new law – guidance that may determine how much the change will ultimately end up benefiting entrepreneurs.

“The proposed rules are absolutely critical to determining whether this will be successful or not. They have the potential to dramatically reduce the ability of companies to take advantage of this,” says Rory Eakin, co-founder of CircleUp, an online portal that connects consumer-product entrepreneurs with accredited investors. If the SEC requires companies to file excessive amounts of paperwork, many entrepreneurs may choose to not take advantage of the rule change, says Eakin.

2. Only accredited investors can actually purchase equity in a private company. While the lift of the ban means that entrepreneurs can tell the world that they are raising money, it’s still only accredited investors who are able to make investments, explains Jay Kalish, general counsel at the equity crowdfunding platform, OurCrowd, on a conference call with reporters and investors earlier this week.

In the U.S., an accredited investor has to have $200,000 in annual income over the past two years and be able to prove a reasonable expectation that he or she will maintain such an income during the current year, or $1 million in net worth, not including the value of his or her primary home. Also, anyone with a history of fraud or a felon, a so-called “bad actor,” will not be able to participate.

3. Your mom, grandma and sister will all start to see more advertisements from startups, even if they aren’t accredited investors. While only accredited investors will be able to purchase private company stock, everyone is going to see more advertisements. “For the non-accredited investor, the regular consumer, you can’t stop what is being publicly put in your face, right? Just by virtue of being a consumer of media and just a consumer, period, you will be messaged, too, and that is different than before. It used to be that the SEC prevented you from seeing these sorts of things,” says Mittal. “There is a whole new type of messaging that regular people will be exposed to.”

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