Tag Archives: regulation d

David N. Feldman

SEC Approves Important Rule 504 Changes

A little known and little used part of Regulation D under the Securities Act is about to get some new attention. In what appears to be a gift to the states after somewhat eviscerating their power with the Regulation A+ changes, the SEC, on October 26, 2016, approved final changes to Rule 504. This rule now allows raising up to $5 million in an offering exempt from SEC registration, with as many accredited and non-accredited investors as you would like. The prior limit was $1 million.

There are two ways to use Rule 504. First, you can raise money with no advertising or general solicitation, and not be required to seek SEC or state approval; the securities issued will be “restricted, in other words not able to be publicly traded. Second, you can advertise and solicit, and the stock can trade afterwards on the OTC Pink market, if you go through a registration process in the states where you are making offers. In that case, even though the stock trades, the company does so as a non-reporting company (but some basic information is still filed with OTC Markets). In both cases there would be no SEC filings. And for those seeking to trade and offer in multiple states, many states “piggyback” and do not require a separate reviewif another state has already approved; and sometimes a coordinated review process can be applied.

Unfortunately, a while back, some unsavory types got in trouble for conducting Rule 504 offerings with no information, then getting involved in manipulative trading and the like. But as with other techniques, like reverse mergers, that had been abused, there were and are legitimate quality players in the space. Hopefully they will see this newly increased limit as making Rule 504 much more attractive as they consider the growing panoply of financing options now available for smaller companies.

 

Give Us Your Tired, Your Poor, Your Companies Seeking Capital… The JOBS Act: A New Path to Prosperity or an Opening for Securities Fraud?

After years of (perhaps excessive) regulation aimed at promoting transparency and accountability, the JOBS Act, signed by the President and overwhelmingly passed by Congress, undoes many of these requirements for companies that have the least experience in providing appropriate information upon which an investor can base its investment decision. It may also open the gateway for investors who arguably aren’t armed with the financial knowledge to protect themselves – they may just put it all on red and let it ride.

Continue reading Give Us Your Tired, Your Poor, Your Companies Seeking Capital… The JOBS Act: A New Path to Prosperity or an Opening for Securities Fraud?