Tags: JOBS Act, SEC, Section 12
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By: Mark Tarallo
On December 17, 2014, the United States Securities and Exchange Commission (“SEC) issued proposed amendments to the existing rules adopted under Section 12 (g) of the Exchange Act to reflect the new, higher thresholds for registration, termination of registration and suspension of reporting that were adopted as part of the JOBS Act. In addition, the proposed amendments would revise the definition of “held of record” in Exchange Act Rule 12g5-1, in accordance with the JOBS Act, to exclude certain securities held by persons who received them pursuant to employee compensation plans and establish a non-exclusive safe harbor for determining whether securities are “held of record” for purposes of registration under Exchange Act Section 12(g).
Whether or not an issuer has “gone public,” any issuer that meets certain tests with respect to total assets and number of shareholders is required to file a registration statement and file regular periodic reports (such as forms 10-K and 10-Q). The proposed amendments will adopt the standards set forth in the JOBS Act-an issuer must register if, as of the last day of its last fiscal year, it (i) had greater than $10 million in assets and (ii) had greater than 2,000 holders of record (or 500 persons who are not accredited investors) of any class of its securities. In addition, the proposed amendments will revise the rules to make them consistent with the standards for termination of registration and suspension of reporting set forth in the JOBS Act.
The proposed amendments will also address the concept of securities “held of record.” In an effort to meet the goals of the JOBS Act of increasing the ability to raise capital while lessening the administrative burden on issuers, when determining whether or not an issuer must register, the issuer may exclude from the calculation of securities “held of record” any securities that are held by persons who received them pursuant to an “employee compensation plan” in a transaction exempted from the registration requirements of Section 5 of the Securities Act. This amendment may have a significant beneficial impact on technology companies and other issuers that grant restricted stock to all employees as a matter of course.
The SEC Release containing the full text of the proposed amendments can be found here . The SEC is soliciting comments on the proposed amendments, and the comment period is open until March 2, 2015.
Any questions on this topic, please feel free to contact Mark Tarallo.
Tags: financial accounting, IFRS, JOBS Act, mary jo white, SEC
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By: Mark Tarallo
On May 20, 2014 U.S. Securities and Exchange Commission Chair Mary Jo White spoke at the Financial Accounting Foundation Trustees Dinner. Given the audience, it is not surprising that her remarks focused on accounting issues at the SEC. In her remarks, Chair White mentioned that the SEC is still considering the addition of International Financial Reporting Standards (“IFRS”) for domestic registrants. Although no timetable was given for when the issue would be addressed, White noted that the interests of U.S. investors would be front and center during the IFRS consideration process. In addition, Chair White commented on the continuing efforts of the Disclosure Effectiveness Project, noting that she has directed the staff to undertake a comprehensive review of disclosure requirements under Regulation S-K and make specific recommendations for updating the requirements pursuant to a JOBS Act-mandated report on Regulation S-K that provides the staff’s recommendations for a review of corporate disclosure requirements. She also noted that the Financial Reporting and Audit Task Force, formed in July, 2013, will continue its increased enforcement efforts and will work to look ahead to identify additional areas where financial reporting fraud may be likely to occur, while focusing on internal controls related to the areas that have already been identified as being susceptible to financial reporting fraud.
The complete transcript of Chair White’s remarks is available here.
Tags: bank loans, business capital, crowdfunding, government loans, JOBS Act, quincy college
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On Thursday, April 24, MBBP Corporate Attorney Joseph Martinez will sit as a panelist for Quincy College Symposium on Equity Crowdfunding. With the passage of the Jumpstart Our Business Startups (JOBS) Act of 2012, the world of Equity Crowdfunding promises to stir the pot for investors and entrepreneurs alike. Joe will help lead a discussion that focuses on new and traditional sources of business capital including equity crowdfunding, bank loans, government loans, vendors and more.
For more details or to register visit the event page.
Please feel free to contact Joe with any questions on raising capital.
Tags: JOBS Act, SEC, Secret IPO, twitter
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By: Hillary Peterson
On September 12, 2013 Twitter announced (appropriately, in a tweet) that it had “confidentially” submitted an S-1 to the Securities and Exchange Commission (the “SEC”) in connection with a planned Initial Public Offering (“IPO”). In the immediate aftermath of the announcement, there was significant confusion as to what a confidential filing meant and how it differed from the traditional IPO filing process.
One of the goals of the Jumpstart Our Business Startups Act (commonly known as the “JOBS Act”) was to ease the burden on smaller, growing companies who wish to raise money from the public. One way in which this goal is achieved is by allowing these “emerging growth companies,” defined under the JOBS Act as a company with total gross revenue of less than $1 billion during the most recent fiscal year, to negotiate confidentially with the SEC over the substance of their S-1 filing, away from the public spotlight. Once the negotiation and drafting process is complete, a company’s final S-1 must be made available to the public 21 days before the road show commences and the company begins speaking to investors.
There are a number of benefits for a company which files confidentially with the SEC. Perhaps most significantly, confidential filing allows a company greater control over the timing of disclosure of its intention to go public. Through the confidential filing process, companies are able to test the waters and receive feedback from the SEC without having to publicly disclose essential information related to the company’s financials and other corporate information. Similarly, in the event that a company chooses not to move forward with the IPO process, filing confidentially shields that company from the damage to its reputation that would result from an abandoned offering.
According to one study, in the first year of the JOBS Act, 65% of companies that eventually filed a public registration statement had previously submitted a confidential statement with the SEC. While Twitter may be the most high-profile company yet to avail itself of the new process of confidential filing, every indication is that many companies will continue to use confidential filings as a way to begin the IPO process.
For more information on this topic, please feel free to contact Hillary.
Tags: crowdfunding, JOBS Act, SEC, securities law
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On December 10 MBBP Corporate Attorney Joseph Martinez will be speaking at a Boston Bar Association seminar titled SEC’s Proposed Rules for Crowdfunding. In October the SEC proposed rules to implement Title III of the Jumpstart Our Business Startups (JOBS) Act which introduced a new “crowdfunding” exemption from registration of securities. The rules, if finalized, would make it possible for most privately-held companies to raise capital by selling securities to the public without registering with the SEC. In this program, Joe will review some of the key provisions in the proposed rules and discuss the challenges they pose for crowdfunding.
For more information or to register, please visit the event page.
Tags: equity securities, JOBS Act, SEC
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MBBP Corporate Attorney Joe Martinez just published a new article: Not Quite Private, Private Placements — SEC Lifts Ban on General Solicitations. As part of the implementation of the JOBS Act, the Securities and Exchange Commission (the SEC) has lifted an 80-year ban that previously prevented companies from using any form of “general solicitation” to attract investors. The revised rules will go into effect later this year after the expiration of a 60-day waiting period and the changes will allow companies to advertise about certain types of private offerings of debt and equity securities.
To read the full article, visit our resources page.
Tags: investment funds, JOBS Act, regulation d, SEC
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On July 15 MedCity News published an article titled “‘Can’ doesn’t always mean ‘should’ when it comes to the SEC’s new rules for advertising fundraising“. The article explains that the Securities and Exchange Commission recently voted to adopt a piece of the JOBS Act which would remove a ban on general advertising for private securities. One of the biggest changes companies will face as a result of this new rule is they will be required to take reasonable steps to ensure that their investors are in fact accredited — that they have a net worth of more than $1 million (excluding their homes) or have a salary higher than $200,000. MBBP Corporate Attorney Joe Martinez believes this may be a drawback:
This type of an inquiry is much more intrusive than has been typical for angel investors in the past. I think it could scare away both experienced angel investors and folks new to the game. It also could add a bit more overhead to the financing process.
For more information please see the full article here.
Tags: emerging growth, IPO, JOBS Act, mbbp, MFA, public companies, public filing
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On Tuesday, October 16th Morse, Barnes-Brown & Pendleton, PC and Moody, Famiglietti & Andronico, LLP are holding an informational seminar to discuss the economic basis behind the JOBS Act as well as the specific changes instituted by it. A panel of experts will delve into recent data indicating who is taking advantage of the Act’s provisions and why, and describe the ways in which the new legislation has impacted public filings since its inception.
This seminar will examine the following topic areas:
- Economic and regulatory drivers that set the stage for the JOBS Act
- Goals of the JOBS Act in terms of job creation and IPO revitalization
- Major regulatory changes established by the Act
- The new concept of the “emerging growth company”
- Confidential public filing
- Benefits of going public in today’s market
For more information, directions, or to register, please visit the event page: Exclusive Event – JOBS Act: Pathway for Emerging Growth Companies.
Tags: ipo on-ramp, JOBS Act, m&a, transactions
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MBBP recently posted two new articles in the Business section of our resources page. MBBP Attorney Mark Tarallo authors “The JOBS Act IPO On-Ramp” which discusses the new IPO On-Ramp provisions for the emerging growth company as well as what the provisional changes mean for quality businesses. MBBP Corporate Attorneys Shannon Zollo and Mary Beth Kerrigan also published an article, “Top Ten Issues in M&A Transactions” which provides a list of the top issues individuals may face when negotiating a merger and acquisition transaction including deal structure, working capital adjustments, target indemnification and closing conditions.
Please visit our resources page to view both articles.
Tags: crowdfunding, JOBS Act, MATTO
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On June 13th, MBBP attorney Carl Barnes was a panelist at a seminar on crowdfunding sponsored by the Massachusetts Association of Technology Transfer Offices. The seminar, entitled “Crowdfunding for University Startups – learn how TTOs will be able to use the JOBS 2012 Act to help their start-ups raise early stage funding,” was held at the Cambridge Innovation Center. Crowdfunding won’t become a reality until the SEC adopts regulations implementing Title III of the JOBS Act – and that’s not scheduled to happen until much later this year. In the meantime, there is still a great deal for entrepreneurs to learn and consider.
Tags: exchange act, JOBS Act, SEC
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By: Joe Marrow
On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act (JOBS Act) which, among other things, increases the existing metrics pursuant to which a private company is required to register a class of equity securities under the Exchange Act of 1934. The provisions of the JOBS Act described below take effect immediately.
Previously, the ’34 Act required a company to register a particular class of equity securities with the SEC and commence periodic reporting within 120 days following the last day of any fiscal year in which the company had total assets in excess of $10 million and a class of equity securities held of record by 500 or more shareholders. To provide some flexibility to private companies that have begun to bump up against the requirement for ’34 Act registration, the JOBS Act amends Section 12(g) of the ’34 Act by requiring that a company must register a particular class of equity securities when the company has more than $10 million in assets and has a class of equity securities either held of record by 2,000 persons or more or 500 or more persons that are not accredited investors. Additionally, in calculating the number of shareholders of record listed above, companies may exclude equity securities held of record by persons who received the securities pursuant to exempt transactions under employee compensation plans.
The new provisions should alleviate problems facing developing companies that have been required to finance themselves through multiple private offerings while granting stock options to numerous employees pursuant to compensation plans by delaying the requirement to commence periodic reporting under the ’34 Act.
For more information on the increases to the thresholds for registration under the 1934 Act pursuant to the JOBS Act, please contact Joe Marrow.
Tags: crowdfunding, JOBS Act, SEC
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By: Carl F. Barnes
Crowdfunding – in which entrepreneurs and start-ups raise capital in small amounts from large numbers of ordinary investors – became a reality on April 5, as President Obama signed the Jumpstart Our Business Startups Act, known as the JOBS Act. Well, almost – the Securities and Exchange Commission has been given until the end of the year to write the regulations necessary to implement the Act.
Once those regulations are adopted, entrepreneurs will be permitted to raise up to $1,000,000 in any 12-month period from ordinary investors. The amount any one person can invest in any one company will be limited to the greater of $2,000 or 5% of the investor’s income or net worth – or up to 10% of the investor’s income or net worth (subject to a cap of $10,000) if the investor’s income or net worth equals or exceeds $100,000.
Companies taking advantage of the crowdfunding rules must use either a securities broker or a “funding portal” to find investors. Companies won’t be permitted to advertise the terms of their offering, but they will be permitted to publish notices and use the internet to direct prospective investors to the intermediary. Both the company and the intermediary will be required to make significant disclosures to prospective investors and to the SEC, both before and after the offering. And both companies and their directors and officers had better be careful, because they will all be liable for material misstatements and omissions in their disclosures.
Whether the JOBS Act will satisfy the dreams of the entrepreneurial community by providing efficient and low-cost access to capital or whether the burdens of complying with the Act and the forthcoming regulations will mean that the crowdfunding rules are little-used remains to be seen. Even without the regulations in hand, though, there is much that entrepreneurs who think they will want to try crowdfunding should consider. For a detailed description of the Act and a discussion of those considerations, please click here.
For more information on crowdfunding and private placements generally, please contact Carl Barnes.