On January 9, 2014, the Securities and Exchange Commission released its examination priorities for 2014 (the “2014 Exam Priorities Release”), covering a wide range of issues at financial institutions, including investment advisers and investment companies, hedge funds and private equity funds. The 2014 Exam Priorities Release highlights a number of areas and key risks that the SEC will be monitoring and examining in 2014. The SEC has identified the following core risk areas for investment advisers:
Individuals form limited partnerships, limited liability companies and corporations to limit their personal liability. These legal structures encourage entrepreneurs to take risks. The California Court of Appeal, Second Appellate District, however, has made it easier to add a business owner to a judgment that initially was entered only against the corporate or limited partnership entity he or she owns. In Relentless Air Racing LLC v. Airborne Turbine Ltd Partnership (Dec. 31, 2013) 2d Civil No. B244612, the Second Appellate District reversed the trial court’s finding that the business owner could not be added to the judgment under an “alter ego” theory. The Court of Appeal required the limited partners, as well as current and former general partner entities to be added to the judgment against the limited partnership.
On September 23, 2013, the final rules eliminating the prohibition on general solicitation and advertising for certain offerings under Rule 506 went into effect. While this development was anticipated with much excitement by the angel and venture capital communities, the final rules have created some uncertainty. In this blog post, we address some of the speculations about how to do private placements in this new day and age that are floating around the angel and venture capital communities.
On October 24, 2013, in accordance with Title III of the Jumpstart Our Business Startups Act (the “JOBS Act”), the Securities and Exchange Commission (the “SEC”) issued a press release and published long-awaited proposed rules (Release Nos. 33-9470; 34-70741) (the “Proposed Rules”) to permit companies to offer and sell securities through crowdfunding (“Regulation Crowdfunding”).
On Friday October 3, 2013, Governor Brown signed into law AB 1412, which provides full relief for individuals affected by the decision in Cutler v. Franchise Tax Board, where the California Court of Appeal held that the California tax incentives relating to the sale of qualified small business stock discriminated against interstate commerce and were therefore unconstitutional.
On September 23, 2013, the U.S. Food and Drug Administration (the “FDA” or the “Agency”) issued long-awaited final guidance for developers of mobile medical or health applications (or “mobile medical apps”) used on smartphones and other mobile devices. The final guidance reflects a tailored approach by the Agency to analyzing mobile medical apps, and represents an important step in narrowing the field of interpretation of the current laws.
In almost all corporate transactions, the first piece of written documentation the parties exchange and execute (after a non-disclosure agreement) is a letter of intent or term sheet (“LOI”), which is intended to summarize the main deal points. And as many corporate transactions involve entities organized in Delaware, these documents often select Delaware as the governing law.
The final rules for eliminating the prohibition against general solicitation and general advertising in Rule 506 and Rule 144A offerings will become effective on September 23, 2013, which is 60 days after the July 24, 2013 date they were published in the Federal Register. The rules prohibiting certain “bad actors” from participating in securities offerings conducted in reliance on Rule 506 also become effective September 23, 2013. For more information on these final rules, please see our prior blog entry here. For more information on the JOBS Act and Rule 506, please see our prior blog entry here.
On July 10, 2013, the SEC adopted the amendments required under the JOBS Act to Rule 506 that would permit issuers to use general solicitation and general advertising to offer their securities, subject to certain limitations. In addition, the SEC amended Rule 506, as required by the Dodd-Frank Act, to disqualify felons and other bad actors from being able to rely on Rule 506. The long-awaited new rules will allow issuers that are permitted to rely on Rule 506 to more widely solicit and advertise for potential investors, including on the Internet and through social media.
The SEC also adopted an amendment to Rule 144A that provides that securities may be offered pursuant to Rule 144A to persons other than qualified institutional buyers, provided that the securities are sold only to persons that the seller and any person acting on behalf of the seller reasonably believe are qualified institutional buyers.
This morning the Securities and Exchange Commission, by a 4 to 1 vote of the Commissioners, approved implementing rules under Title II of the Jumpstart Our Business Startups (JOBS) Act to remove the ban on general solicitation for offerings to accredited investors under Regulation D, Rule 506. The SEC has not yet released the final rules as adopted, and we do not yet know what will be the effective date of the final rules. We do however know that the final rules, once effective, will require a Form D to be filed with the SEC at least 15 days in advance of the commencement of any general solicitation for a Rule 506 offering.