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Corporate & Securities
SEC Proposes Exemptive Relief for Finders to Receive Transaction-Based Compensation Without Having to Register as a Broker-Dealer
On October 7, 2020, the U.S. Securities and Exchange Commission (the “SEC”) voted to propose a conditional exemption from broker registration requirements for “finders” who assist issuers with raising capital in private markets from accredited investors. If enacted, the exemption would permit individuals to engage in certain limited capital-raising activities for privately held companies and…
SEC Amends “Accredited Investor” Definition
On August 26, 2020, the U.S. Securities and Exchange Commission (SEC) adopted amendments expanding the definition of “accredited investor” to allow additional categories of investors to invest in unregistered private offerings. The new definition moves beyond the long-standing reference to wealth and income to determine whether individuals may be deemed accredited investors, adding established, objective…
COVID-19: SEC and FINRA Issue Temporary Relief on Regulatory Obligations and Offers Guidance on BCP for Broker-Dealers
As the novel coronavirus (“COVID-19”) continues to spread and its impact on the U.S. financial market rapidly intensifies, brokers and dealer are presented with significant financial or operational challenges and risks. The SEC started taking action as early as of February 2020, granting continued assistance to and relief for advisors impacted by COVID-19. On March…
Have Reservations? How to Choose the Right Entity and Financing for your Restaurant
If you’re thinking of starting, purchasing or expanding a restaurant, you will likely need some capital. Although you do have a menu of options to choose from, you will need to make sure you order up the right structure to fit your financing needs. The Restaurant Roundtable Series consisted of Citrin Cooperman CPAs & Practice…
The Use of “Referral Networks” in Online Capital Formation
Read Mitchell C. Littman’s comments to Grant Harvey from Dealflow.com.
How to Avoid Common Investor Problems
The Financial Industry Regulatory Authority (FINRA) has published a best practices guide for investors that describes common investor problems and how they can be avoided. These are the most common complaints FINRA’s Investor Complaint Center receives, and recommendations for avoiding them.
1. Misrepresentation. Misrepresentation is an untrue statement or omission of material fact that a broker makes purposefully relating to an investment. This may happen with any security, but is more common with low-priced, speculative securities because they are riskier.
FINRA Issues Investor Alert on Private Placements
An investor alert has been issued by the Financial Industry Regulatory Authority. The alert warns investors that private placements are risky and can tie up funds for a significant period of time.
A private placement is an offering of securities by a company that is not offered to the public at large and is not registered with the SEC. Many of these offerings are made pursuant to Regulation D of the Securities Act of 1933. Generally, one must be an “accredited investor” to make an investment in a private placement. Institutions such as banks and insurance companies, and organizations or trusts with assets of $5 million or more, are accredited investors.
FINRA Issues Warning of Brokerage Firm Imposters
An investor alert was issued by the Financial Industry Regulatory Authority warning of calls from scammers falsely claiming to represent a well-known brokerage firm. In this scam, the imposters are claiming to be offering certificates of deposit with high yields, but the goal of the cold call is to get the potential victim to reveal personal or financial information. Such information may then be used in an attempt at identity theft or another crime. The fraud attempt is the latest twist on the common scam of “phishing” for information via cold calls.
The SEC’s Proposed Crowdfunding Rules
On October 23, 2013, the Securities and Exchange Commission (the “SEC”) proposed rules under the Jumpstart Our Business Startups Act (the “JOBS Act”) to permit companies to offer and sell securities through crowdfunding.1 Historically, because offers and sales of securities to the public generally require compliance with the registration requirements of the Securities Act of 1933 (the “1933 Act”), crowdfunding has been restricted to non-securities matters, for example, to solicit donations. Under the SEC’s proposed rules, Section 4(a)(6) of the 1933 Act will be a new registration exemption available for crowdfunding offerings under certain conditions.