General/Miscellaneous

One recent much-discussed political issue (at least until another one replaced it a few hours later) was that some of the Republican members of Congress admitted in interviews that they had not read the American Health Care Act of 2017 before voting to approve it. Democrats mocked this as further evidence of a rushed, irresponsible process. I’m not using this corporate and securities law blog to expound on my political views on the AHCA or anything else. (I do that about once every three months on my personal Facebook page.) However, on the general question of whether legislators should be expected to have read the full text of the bills they’re voting on, I’m with the “that’s a ridiculous waste of time” camp.

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Reading Statutory LanguageRead More »

The New York Times recently poured cold water on the notion that artificial intelligence is on the verge of replacing lawyers. A quote from the article correctly identifies the logical error that underlies the slippery slope-type theorizing:

“There is this popular view that if you can automate one piece of the work, the rest of the job is toast,” said Frank Levy, a labor economist at the Massachusetts Institute of Technology. “That’s just not true, or only rarely the case.”

This has been the story of the practice of law for at least the past 30 years or so and didn’t start with the recent advances in natural language processing for document review and similar developments. Over the years, new technologies have reduced or eliminated time-consuming aspects of the job without eliminating the job of attorney – computers replaced typewriters, automated redlining programs replaced hand redlining, email replaced physical delivery of paper, etc. While these developments have certainly affected employment in the industry overall, with sharp reductions in support staff such as legal secretaries, it hasn’t at all changed the basic arrangement that if you’re buying a company or bringing a lawsuit, you need to hire a law firm to look out for your interests, and there is a person at the law firm that needs to oversee the process. …

Will Lawyers be Replaced by Robots?Read More »

The Wall Street Journal reported recently on the Transactional LawMeet, which is basically the equivalent of a moot court competition for law students, but for transactional law. The impetus for this sort of program is the sense that the law school curriculum has always been more focused on training litigators, while transactional attorneys have to learn most of their craft on the job after graduation. I think this overstates it a bit. My first year “Lawyering” class at NYU Law included a mock negotiation. (I totally botched it, as my counterpart could see my notepad, indicating the final number I was willing to accept in the negotiation.) Also, most law schools have classes in the substantive law that’s most relevant to transactional work, e.g., Contracts, Corporations, Securities Regulation and Secured Transactions.

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What Do Law Students Need to Learn about Transactional Law?Read More »

The Wall Street Journal recently profiled the increasing proliferation of “family offices,” investment firms set up by, and under the sole control of, very wealthy families. Family offices also provide services other than investment advice – accounting, legal, household management, etc. They have been around at least since one was set up by the Rockefeller family but have become commonplace in recent years. The staggering growth in wealth that has fed the growth of family offices is, of course, the subject of much political debate about causes and what if anything to do about it, but for purposes of this post I’ll steer clear of that minefield.

The Journal article cites privacy as one of the main rationales for using a family office, as the entity will typically not have to make public disclosures. However, assuming the alternative to a family office is investing one’s fortune with funds (hedge, private equity, venture capital), there wouldn’t be much of a privacy issue there, as a fund’s limited partners (investors) can expect to have their confidentiality respected. (Of course, there’s no reason why even the super-wealthy need to employ alternative investments like this. Warren Buffett has made a good case recently that because of funds’ fee structure, investors would be better off with simple index funds.)

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The Rise of Family OfficesRead More »

If you are a regular reader of my blog posts (Hi, Mom!), you’ve noted that I address several substantive topics of interest in corporate and securities law to my clients and other attorneys, along with “softer” topics about the business of law practice, dealing with clients, etc. The substantive posts are, by design, short and to-the-point, unlike a big firm’s detailed summary of the latest 500-page rule release from the SEC (because there’s no need to duplicate those law firm memos, which are freely available to all, and also, more importantly, because I don’t want to write long memos). But hopefully, these posts have some value to my readers.

I thought it would be helpful to list these posts (through January 2017) in one handy place for easy reference, with links, in reverse chronological order within each category:

Financing Transactions/Securities Offerings

• Recent Trends in Financing Startups
• The Shark Tank Approach to Startup Investing
• Regulation A+ – An Improved Way for Smaller Companies to Go Public
• Regulation A+ – How It Fits into the System
• The Latest on Possible Tweaks to the Accredited Investor Definition
• Should You Be Making Blue Sky Filings in New York?
• Streamlining of Blue Sky Filings
• Using Self-Directed IRAs for Friends and Family Financings
• SAFE Equity as an Alternative to Convertible Notes
• Equity as an “Expensive” Form of Financing
• SEC Advisory Committee Report on Accredited Investor Definition
• SEC Crackdown on Undisclosed Unregistered Offerings
• The SEC’s Guide to Avoiding Investor Scams
• Reverse Mergers
• The Latest from the SEC on Private Offering Regulation
• Limiting Investment Risk for Non-Accredited Investors
• When to Use PPMs
• Further Thoughts on JOBS Act and Investor Fraud
• Regulation A+ Proposed Rules
• Bridge Loans
• The Arian Foster IPO
• Verification of Accredited Investor Status
• Use of General Solicitation and Advertising in Rule 506 Offerings
• Use of Finders in Securities Offerings

SEC Disclosure Matters

• The SEC Proposes Expanding the Pool of Smaller Reporting Companies
• The SEC’s Discussion of Risk Factors
• Congress Acts on Forward Incorporation by Reference
• The Pay Ratio Rule and the Effect of Disclosure
• Get That Form 4 Filed!
• Regulation FD
• Risk Factor Gone Viral

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Links to Some of My Greatest HitsRead More »

As part of the extensive media coverage of Prince’s recent death, it’s been reported that Prince died without a will as a result of his distrust of lawyers. If true, it’s a pretty disastrous result from an estate administration perspective. The problem is not so much that he has a large estate – under Minnesota’s laws of intestate succession, his siblings and half-siblings would receive their share of the assets. Rather, the issue is that the Prince business doesn’t end with his death. Sales of his music predictably skyrocketed post-mortem, and there are a number of decisions to be made with respect to music rights going forward, such as what to do with his extensive vault of unreleased music. Who makes those decisions? What if the heirs can’t agree on that?

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Prince and the Consequences of Reflexive Distrust of AdvisorsRead More »

One of the most challenging aspects of running a law practice is keeping clients happy – to the extent possible – with the legal fees they’re being charged. My goal (easier said than done) is to accurately predict in advance for the client the cost of a particular matter. Of course, if a matter is being done on a fixed fee basis, then there’s no chance of the client being surprised by the invoice, but setting the fee involves accounting for uncertainty in the amount of time to be spent.  I have found over my years of practice that efforts by clients to save on legal fees often have the counterintuitive effect of raising them in the long run. Some common examples:

• “Let me take a crack at it first and send it to you” — Clients often think they will save on legal time by taking a DIY approach and sending me a contract that they’ve drafted for my review, rather than just asking me to draft it in the first place after informally discussing the terms with me. With very, very few exceptions (and ethical obligations preclude me from specifically naming them here), my clients, while they may be very talented at running their respective businesses, are terrible at drafting contracts. Often, it takes me longer to clean up the resulting mess than it would be for me to start from scratch.

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How Attempts to Save on Legal Fees Can BackfireRead More »

The law professor Noah Feldman writes in Bloomberg about the problem of marginally qualified law school graduates who fail to pass the bar exam and find themselves saddled with a huge amount of student loan debt. Since the financial crisis, there has been a cottage industry of articles and blog posts (and even more online comments to those pieces) arguing that if you can’t get into a top law school, you’re essentially throwing away your money by going to a less competitive one. Feldman rightly notes that it’s paternalistic to urge less competitive law schools not to admit people who, statistically, are less likely to succeed based on LSAT scores. As long as students have a clear-eyed sense of the risks involved, then a law school shouldn’t be telling an ambitious kid with a 148 LSAT score to try another career.

The problem, however, which I don’t think Feldman sufficiently addresses, is that many prospective law students in fact don’t have an accurate sense of the risks involved. You don’t have to be overly cynical to acknowledge that law schools have an incentive to make it seem as if their graduates have a bright future and will downplay these risks, so as to collect three years of tuition. One example is the statistic about percentage of graduates employed after graduation, which affects the law school’s rankings. Following the financial crisis and decline in available entry-level legal jobs, many schools took steps to place their not-yet-employed graduates in non-profit and government positions as a bridge to eventual private sector employment. While these temporary positions may end up being valuable experiences for the graduates, it isn’t the outcome they necessarily expected entering law school. Put another way, when a prospective student sees that a law school has a post-graduation employment rate of, say, 90%, which sounds good, they are not necessarily aware that some significant portion of those employed are not employed in the career path the student is hoping to take.

So, while I don’t think it’s reasonable to tell a less-competitive law school that they should refuse to admit students below a certain LSAT cut-off, or who are otherwise statistically likely to find it difficult to make it in a competitive law marketplace, I do think they have an obligation to ensure that their students have a clear sense of what they’re getting into before they write their first tuition check or sign onto a student loan arrangement. If the schools are not able to meet this obligation, it should be imposed on them, either via regulation or the widespread adoption of a third party assessment of the post-graduate performance of each school that tells the true story of what a student could expect and isn’t as subject to gaming as the current rankings.

When people seek advice about whether to launch an entrepreneurial venture, as opposed to remaining in a steady, salaried job, they are often told about the dismal prospects of the average startup.  The naysayers trot out statistics about the high percentage of startups that fail within the first few years and how founders usually find themselves earning less money than they could by working for a larger company. …

The Long Term Benefits of Being an EntrepreneurRead More »