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The SEC Streamlines Accredited Investor Verification Under Rule 506(c)

November 21, 2020 By Andrew Abramowitz Leave a Comment

The SEC’s recent final rule release regarding exempt offerings covered various topics, including the subject of my previous post, on the expanded offering limits for Regulation CF crowdfunding and Regulation A offerings. In the release, the SEC also provided some welcome relief in the accredited investor verification process for Rule 506(c) offerings.

[Read more…]

Related posts:

  1. Reluctance to Engage in Accredited Investor Verification
  2. Verification of Accredited Investor Status
  3. Simultaneous Regulation CF and Rule 506(c) Offerings

Filed Under: Crowdfunding, Financing Transactions/Securities Offerings

The SEC Broadens the Crowdfunding and Regulation A Exemptions

November 9, 2020 By Andrew Abramowitz Leave a Comment

The SEC issued a 388-page final rule release, entitled Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets. (The clunky wording seems like it was done to accommodate a catchy acronym, but “FCFAEIOBIATCIPM” doesn’t really flow.) The release details rule changes in a variety of areas relating to private offerings, but I will focus for this post on the expansion of the crowdfunding (Regulation CF) and Regulation A offering exemptions, and cover other topics in future posts. Here are the SEC’s press release and fact sheet about all the new rule changes.

[Read more…]

Related posts:

  1. Regulation A+ – An Improved Way for Smaller Companies to Go Public
  2. Regulation A+ Proposed Rules
  3. The Latest from the SEC on Private Offering Regulation

Filed Under: Crowdfunding, Financing Transactions/Securities Offerings

The SEC’s Proposed Expansion of Accredited Investors

January 21, 2020 By Andrew Abramowitz Leave a Comment

When to use a Private Placement Memorandum | Andrew Abramowitz, PLLCThe SEC has issued a proposal to expand the definition of “accredited investor” as used for the Regulation D safe harbor for private offerings. This press release/fact sheet summarizes the changes. There are a number of technical updates to reflect developments in how business is now conducted, e.g., LLCs with sufficient assets would qualify in the same manner as corporations now do. However, the change that would likely have the most impact, at least in my practice, is the inclusion as accredited investors of natural persons with appropriate professional certification, such as holders of a Series 7 securities license, even if they don’t qualify under the existing standards for natural persons for income or net worth. I’m not aware of any significant opposition to this concept and assume it will be enacted by the SEC after public comment.

However, any time the topic of the accredited investor definition is raised serves as a trigger for me to raise the issue of investment limits in private offerings. Crowdfunding offerings under Regulation CF, enacted in recent years and still used far less than Regulation D, impose investment limits on investors that are based on a percentage of the investor’s income or net worth. Accordingly, the structure precludes a total financial wipeout of the individual investor as a result of a failed investment. [Read more…]

Related posts:

  1. The Latest on Possible Tweaks to the Accredited Investor Definition
  2. Reluctance to Engage in Accredited Investor Verification
  3. A Possible Expansion of Regulation A+

Filed Under: Financing Transactions/Securities Offerings, Startup Matters

The SEC’s Concept Release on Exempt Offerings and Investment Limits

July 23, 2019 By Andrew Abramowitz Leave a Comment

Share Buybacks as a Political Issue | Andrew Abramowitz, PLLCThe SEC recently issued a long “concept release” on harmonization of securities offering exemptions. Whenever I hear about one of these, my first thought is that it’s somehow like a concept album from a ‘70s prog rock outfit (and therefore to be avoided), but in reality, the point of concept releases is to solicit input from the securities law community on a broad topic without immediately proposing changes. In this case, it’s about the complex web of exempt offering types that have evolved over the years and whether and how to harmonize them.

[Read more…]

Related posts:

  1. Investment Limits in Title III Crowdfunding
  2. Simultaneous Regulation CF and Rule 506(c) Offerings
  3. The Latest on Possible Tweaks to the Accredited Investor Definition

Filed Under: Crowdfunding, Financing Transactions/Securities Offerings

Pushing Back Against the SEC on Finders Rules

April 1, 2019 By Andrew Abramowitz Leave a Comment

Legal Referrals | A. Abramowitz | NYC

As I’ve blogged about in the past, the SEC in recent years has taken a relatively strict position against payments to “finders” who are not registered broker-dealers, as compensation for introducing investors to companies. The SEC’s focus has primarily been on “transaction-based compensation,” i.e., payment to the finder that is contingent on investment by the introduced investor, which according to the SEC is a hallmark of broker-like activity that requires registration.

[Read more…]

Related posts:

  1. Reluctance to Engage in Accredited Investor Verification
  2. Links to Some of My Greatest Hits
  3. Use of Finders in Securities Offerings

Filed Under: Financing Transactions/Securities Offerings

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"Andrew Abramowitz, a lawyer in Manhattan who has worked with both buyers and sellers of private placements, said every investor should approach a private placement skeptically." -- Paul Sullivan (New York Times)

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"If the goal [...] is to protect people from losing all of their money in an illiquid investment, the current standard fails on that count, too. Andrew Abramowitz, a lawyer in Manhattan who has worked with both buyers and sellers of private placements, said a better standard might be to limit how much of their net worth people can invest." -- Paul Sullivan (New York Times)

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