Emerging Markets Law

Showing 19 posts from September 2013.

SEC Extends Comment Period for Form D Amendments

Posted In Crowdfunding

Citing a "large amount of public interest" the SEC has extended the comment period by an additional thirty days (counting from the date the notice of the extension is published in the federal register).

Publication in the federal register generally takes a few business days, so the extended comment period will probably run until sometime in early November.

An informal survey of the comments submitted so far can be summarized as "339 opposed, 9 in favor and 30 irrelevant or incomprehensible."

The extended comment period (probably intended to buy the SEC more time to figure what to do with the mess it has created) will unfortunately tend to increase the confusion already present in the market place.  For those keeping score, there were three related releases on July 23rd, two became effective on September 23rd and the third (regarding amendments to Form D) has had its comment period extended.  So, if you are an issuer engaged in a Rule 506 offering you need to think through the decision to stay private (Rule 506(b)) or engage in public solicitations (Rule 506(c)).

If you opt for public solicitations, you should expect that the SEC is going to require you to do something on your Form D, but, because those rules are not yet adopted, we can't know for certain what that will be.

SEC Releases Government Shutdown Plan

Posted In Government

The SEC has released its operations plan for any shutdown arising from a lapse in appropriations.  Public hearings and meetings will be cancelled but EDGAR should remain operational.

Start-ups Rush to Use Public Solicitations

Posted In Crowdfunding

Start-ups and other small businesses are rushing to take advantage of the SEC's lifting of the prohibition on general solicitations, according to an article in the Wall Street Journal.  The piece claims that as of Wednesday, September 25, 2013 a total of 43 companies had filed Form Ds indicating that they were planning to engage in a public solicitation under Rule 506(c).

California Social Media "Eraser" Law

Posted In Government, Industry

California Governor Jerry Brown on September 23, 2013 signed into law California Senate Bill 568, in an attempt to legislate a requirement that social media networks adopt several new safeguards to protect minors from advertising and inadvertent posts that could be harmful or embarrassing to minors.

Among other things, effective January 1, 2014, the new law will require that social media sites (including websites, mobile apps and other online services):

  • Not permit adult-appropriate advertising to be targeted to minors;
  • Not disclose the personal information of minor users to advertisers of specified types of products (such as dating or adult entertainment services); and
  • Provide a mechanism or service that will allow a minor user to delete, or request the deletion of, content posted by that minor user.

This last point, which has been dubbed the "social media eraser" is perhaps the most controversial.  Although many sites already permit users to modify and delete their own posts, some sites may need to modify their features or develop alternative methods of complying with the law.

Because social media is effectively global, California's legislation will create a de fact requirement for the entire social media universe.  More analysis to follow.

SEC Aims to Publish Crowdfunding Regs This Year

Posted In Crowdfunding

Speaking on Bloomberg TV, SEC Chair Mary Jo White said it was a "very high priority" to finalize the crowdfunding regulations that are needed to implement Title III of the JOBS Act and that she hoped to have those regulations released before the end of the year.

New Form D Now Available

Posted In Crowdfunding

The SEC has posted the new Form D to its website.

The new Form D requires issuers who are relying on Rule 506 to indicate: (a) whether they are relying on Rule 506(b) (for the so-called "quiet" offering) or (b) whether they are relying on Rule 506(c) (the form of exempt offering in which public solicitations are permitted).

The new Form D also includes a certification (on the last page above the signature) that the issuer is not disqualified from relying on Rule 506.  The SEC's new rules on disqualification were released on July 23, 2013 and became effective yesterday.

SEC Launches FTP Site to Collect Solicitation Materials for Rule 506(c) Offerings

Posted In Crowdfunding

The SEC has launched a new FTP site to collect solicitation materials for issuers relying on Rule 506(c) to make public solicitations for exempt sales of securities.

Submissions are voluntary, although the SEC has published proposed rules that would make it mandatory for Rule 506(c) issuers to submit their public solicitation materials at least 15 days prior to their use.

This system is probably going to run into problems.  Issuers can only upload a total of five files with an aggregate size of 12MB. If the total size of submissions exceeds the limit, multiple submissions are required.

PayPal Promises to Revamp Crowdfunding Rules

Posted In Crowdfunding

PayPal has claimed that it is working to revamp its rules governing payments to crowdfunding campaigns after funds were frozen and then released in connection with an Indiegogo campaign.

In early September Red Thread Games reported that PayPal had frozen funds it had raised in Indiegogo for its new game, Dreamfall Chapters.  After a few days of back and forth, both PayPal and Red Thread Games reported that the mix-up had been resolved and the money had been released.

Since then PayPal has announced that it is reaching out to major crowdfunding sites in an effort to re-vamp its rules regarding payment to crowdfunding campaigns:

Crowdfunding sites are an exciting and innovative new way to directly connect entrepreneurs with the people who want to help them create new products and services. However, there are unique regulatory and risk aspects inherent to this new way to raise money from supporters around the world. To name one, we sometimes hear from campaign contributors that they are confused about what exactly their money is going towards, and assume that they’ll get it back if the venture is not successful.

Because the model is so new, it is potentially open to abuse. PayPal has a responsibility to ensure that the system remains secure, in compliance with Government regulations around the world, and that consumers who contribute to these campaigns understand where their money is going.

Some of PayPal's competitors solve this by simply refusing to allow their payment systems to be used at all for crowdfunding. We don't believe that's the right approach because, when done right, crowdfunding is a powerful catalyst for innovation. However, it's clear that our existing policies and processes aren’t working quite right for this particular fundraising model.

We are now in the midst of overhauling our policies in this space. We're talking to the major crowdfunding players that we work with to put in place a permanent solution that avoids unnecessary account limitations. But making this work for all stakeholders – contributors, entrepreneurs, crowdfunding sites and us -- is pretty complicated. As soon as I have more to share, I promise to update everyone.

Atlanta Among Best Cities for Start-ups

A new report from the Ewing Marion Kauffman Foundation identifies Atlanta as one of the best cities in the U.S. for start-ups.

Crowdfunding Alternatives for Commercial Real Estate

Posted In Crowdfunding

Check out my latest post on Crowdfunding Alternatives for Commercial Real Estate in the Atlanta Business Chronicle.

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