Funding

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On November 1, the OCC issued Bulletin 2023-34 addressing the topic of “venture lending,” referred to as “commercial loans to early-, expansion-, and late-stage companies.” According to the Bulletin, venture lending is often used to fund new business growth and development but comes with its own set of risks and challenges, and financial institutions must take care to meet the agency’s expectations for risk management and risk-rating of venture loans. Key takeaways from the OCC’s Bulletin including the following:Continue Reading OCC Issues Bulletin on Risks Related to Venture Lending

On April 17, 2018, the New York State Attorney General (“NYAG”) sent a “Virtual Markets Integrity Initiative Questionnaire” to 13 companies operating virtual currency trading platforms. The questionnaire consists of 34 questions covering a number of topics, including ownership and control, operation and fees, trading policies and procedures, outages and other suspensions of trading, internal controls, and privacy and money laundering.
Continue Reading New York’s AG Enters the Cryptocurrency Ring as Federal, State Authorities Find Regulatory Footing

The U.S. Congress is currently considering legislation that would tap the brakes on foreign direct investment in the United States, particularly on investments in sensitive industries like artificial intelligence, robotics, and semiconductors. We know: you’re saying we already have that in the form of the Committee on Foreign Investment in the United States (known as CFIUS).
Continue Reading Seeking foreign investors for your tech startup? Congress says, “not so fast.”

On April 5, 2012, President Obama signed into law the landmark Jumpstart Our Business Startups Act (JOBS Act), for the purpose of encouraging the funding of startups and small businesses throughout the United States.  Title III of the JOBS Act, otherwise known as Regulation Crowdfunding or Reg CF, received the most attention because it legalized investment crowdfunding.  The purpose of Reg CF was to make it easier for startups and small businesses to access capital, to give more people the ability to participate in investment opportunities, and ultimately, to create jobs and stimulate economic growth.
Continue Reading Let’s Finally Fix Crowdfunding!

On October 30, 2015, the Securities and Exchange Commission adopted the final rules for “Regulation Crowdfunding” nearly two years after issuing its proposed rules and over three years after the enactment of Title III of the JOBS Act. Since the publication of those final rules, many commentators have blogged about those rules, and many have not been kind, criticizing the final rules as, among other things, unusable by the very start up issuers for which they were supposed to be “the solution.” Lost in the shuffle that day was the announcement by the SEC of proposed changes to two other exemptions from the registration requirements of the Securities Act of 1933: Rule 147 and Rule 504.  Rule 147 is a “safe harbor” provision for intrastate securities offerings exempted from registration by Section 3(a)(11) of the Securities Act, while Rule 504 is one of the four exemptions provided by Regulation D. Both of these rules have been seldom used in the modern era. Rule 147 has proven to have too many requirements and restrictions to be useful, especially in the modern age of the internet.  Rule 504 has proven not to be attractive to issuers privately placing their securities, who have instead almost universally chosen to rely on Rule 506(b).With its proposed changes to these two rules, the SEC has taken positive steps toward creating more useful exemptions and alternatives to Rule 506(b) offerings.
Continue Reading Far From The Madding Crowdfunding: A look at the SEC’s proposed changes to Rule 147 and Rule 504

On October 24, 2013, the Securities Exchange Commission (the “SEC”) published proposed rules (Release Nos. 33-9470; 34-70741) to permit companies to offer and sell securities through “regulation” crowdfunding as proposed in the Jumpstart Our Business Startups Act (the “JOBS Act”), which we have written about here. The 90-day comment period on the proposed rules ended January 23, 2014 but comments are still being submitted to the SEC’s website, with the latest comment submitted on June 3, 2014. There is no indication as to when the SEC will publish its final rules relating to crowdfunding.
Continue Reading Crowdfunding 2.0?

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:
Continue Reading SEC Announces 2014 Examination Priorities for Investment Advisers

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”).
Continue Reading Crowdfunding Moves Forward: The SEC Issues Proposed Rules on Crowdfunding

There has been a lot of talk recently about a phenomenon called crowdfunding, a new type of fundraising that relies on social media and the Internet to raise small amounts of capital from large numbers of individuals. Despite the talk, crowdfunding remains impermissible under the securities laws absent a costly registration with the SEC and with state securities administrators. Last year, two people created a website, a Facebook page, and a Twitter account to solicit funds to be used to purchase Pabst Brewing Company. They received over $200 million in pledges from more than five million individuals, but were later subjected to cease-and-desist proceedings initiated by the SEC. Crowdfunding would seem to be a viable approach to small company capital formation, if only it were legal.
Continue Reading The Entrepreneur Access to Capital Act and What It Could Mean for Startups