The Securities and Exchange Commission has charged and frozen the assets of Ariel Quiros of Miami, FL, William “Bill” Stenger of Newport, VT, Q Resorts Inc. and Jay Peak Inc. in connection with violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The allegations are disheartening as the Jay Peak project...

Private Placements: Focusing Closely on EB-5 Program It is well-known in the EB-5 community that the Securities Exchange Commission (the “SEC”) is scrutinizing the EB-5 program closer than ever. The SEC and the Financial Industry Regulation Authority (“FINRA”) each formalized their belief that the EB-5 program needs greater regulation in their 2016 examination letters. Both regulatory agencies...

On October 30, 2015, by a 3-1 vote, the SEC adopted final rules to permitting small companies to raise funds by selling shares to the investing public through crowdfunding offerings conducted on Internet fundraising portals. In this long-awaited vote, which represented the last remaining significant rulemaking procedure required by the Jumpstart Our Business Startups (JOBS) Act of 2012 , the agency finally authorized...

Last week, I was a guest on the “This Week in Law” Podcast, where I talked about the potential impact of the recent invalidation of the US-EU Safe Harbor framework for online privacy. This will likely have far-reaching consequences for startups with users in the EU. Click on the link below for my discussion and for a lively debate on privacy public policy in general. (Please visit the site to view this...

At this point, having discussed the services a placement agent can provide, the kinds of compensation used, and other important terms to keep an eye on when negotiating for the services of a placement agent, there is still the threshold matter of determining whether using placement agents makes sense (and when it doesn’t) in the first place. In addition, how to decide which specific placement agent to use? The first...

Raising money for private companies can be a frustrating and stressful experience. Without the kind of access to the investing public that a public company enjoys, and given the kinds of restrictions on who can invest in many types of private placements, finding appropriate investors can be a daunting proposition. It can also be expensive, not only in terms of money but especially in terms of the time and effort required...

Yesterday, the SEC’s Advisory Committee on Small and Emerging Companies, comprised of a number of smart and thoughtful people I know, made some terrific recommendations to the Commission. The biggest, something for which many have been waiting for quite a while: that private placement finders, who simply introduce investors to companies, should not have to be registered as brokers even if they take a commission...

On August 6, 2015, the Securities and Exchange Commission (the "SEC") issued a number of Compliance and Disclosure Interpretations (" CDIs ") related to the issue of “general solicitation” (or “general advertising”) as it pertains to issuers seeking to raise capital in private placements in a Rule 506 transaction. As this blog has discussed elsewhere, Rule 506 under the Securities...

As we still await the first completed Tier II Regulation A public offering, and rumors are swirling that several are getting close, the Financial Industry Regulatory Authority (FINRA), which regulates broker-dealers, has confirmed what most already know. In a release a few weeks ago, they clarified that Regulation A+ offerings are no different than other public offerings. Namely, if FINRA members are involved in the offering...

Congress created the EB-5 Program in 1990 to benefit the U.S. economy by attracting investments from qualified foreign investors. Under the Program, each investor must prove that at least ten new jobs were created or saved as a result of the EB-5 investment. More than 25 countries, including Australia, Portugal, Spain, and the United Kingdom, use similar programs to attract foreign investments; however, the American program...

We all know about the famous letter from one Virginia O’Hanlon in 1897 to the New York Sun newspaper asking if there really is a Santa Claus. Her father encouraged her and told her, if it’s in the Sun it must be so. The paper wrote an editorial entitled, “Yes, Virginia, there is a Santa Claus.” The original letter, by the way, is now valued at around $30,000. Now we imagine Virginia’s great...

by Mary C. Zinsner and Ethan G. Ostroff The Federal Trade Commission is proactively encouraging start-ups to take cybersecurity seriously and include consumer data safeguards early in the innovation process. At the FTC’s Start with Security conference in San Francisco on September 9, FTC Chairwoman Edith Ramirez called on innovators to instill a “culture of security” early in the product development...

As a follow up to my previous blog post where I discussed the new CDIs relating to the definition of "general solicitation" in private offerings conducted under Rule 506(b), I decided to discuss the recently issued SEC no-action letter to Citizen VC . This no-action letter is all about the application of the new SEC guidance regarding general solicitation in practice. This can serve as a useful tool for conducting...

As reported by Crowdfund Insider , Massachusetts and Montana filed their first “Opening Brief” in their case against the SEC trying to invalidate the regulations passed under Regulation A pursuant to the Jumpstart Our Business Startups (JOBS) Act of 2012. Essentially, they say the SEC overstepped its statutory authority when it preempted state review of offerings to “qualified purchasers” (as required...

One common misconception I encounter among startups is the idea that companies raising capital can include non-accredited investors in Rule 506[1] offerings. While it is technically true that a Rule 506 offering may include up to 35 non-accredited investors, what is often missed is that it is not really practical to do so. The main reason for this is set out in Rule 502(b), which requires that an issuer provide a large...

Earlier this week, FINRA Rule 2040 (the “Rule”) went into effect. The Rule requires all FINRA members to disclose to investors all fees and commissions paid to foreign agents and to receive written acknowledgement by investors that they are aware of these fees. This will have an impact on EB-5 projects. As a result of the Rule, any Regional Center that is registered as a broker-dealer will have to receive...

Every so often a public company finds itself unable to file periodic reports for a protracted time. For example, a company may upgrade auditors and the new firm may advise of the need to re-audit prior years, which can take significant time. Until there is a reliable starting point for financial statements, new filings are in limbo. As time marches on, the older missed filings have less and less signficance to investors...

by David Carroll The next few years may be the largest watershed event in opening up private equity capital since the 1980s when Regulation D was first published by the Securities and Exchange Commission (“SEC”). By allowing general solicitation and general advertising in private offerings the SEC has now opened a new and potentially revolutionary method for raising private capital. The SEC adopted final...

On August 13, 2015, USCIS held one of its frequently scheduled EB-5 Immigrant Investor Program Stakeholder Engagements, but this time from Los Angeles, California. The changed location is part and parcel of the agency’s efforts to assertively engage in states that have directly benefited from the EB-5 investment program. But for the poor sound quality, this engagement had a fair balance between being informational...

Last week, USCIS issued a warning advising that EB-5 regional centers and related commercial enterprises should not contain the words “United States,” “U.S.,” “US” and “Federal” in their names. The concern is that using such names may give the false impression that there is a relationship between the entity and the federal government or a federal agency, or that the project...

by Adam Ettinger As you know, the New York “BitLicense” regulations became effective on June 24, 2015, and businesses that are engaged in “Virtual Currency Business Activity” involving New York or a “New York Resident” must apply for a license. The deadline for doing so is August 8, 2015. “Virtual Currency Business Activity” is defined broadly: Virtual Currency...

Mona Shah & Associates was a part of the EB-5 Investors conference in Los Angeles this Monday that was heavily attended and included several key players that will be play a large part in determining the future of the EB-5 industry. With the Regional Center program up for renewal on September 30 th , there is the potential for significant changes to the EB-5 program in the coming months and this was a very important...

On May 20, 2015, the SEC issued proposed amendments to Form ADV and the Investment Advisers Act rules. In the release, the SEC proposed amendments to Form ADV that would require advisers to disclose additional information, such as information about separately managed account business, and allow private fund adviser entities operating a single advisory business to file one Form ADV. The release also contains proposed amendments...

by David Carroll Since the enactment of the Jumpstart Our Business Startups Act (the “JOBS Act” ) in 2012, the Securities and Exchange Commission (“ SEC “) has slowly been making its way through the titles to the JOBS Act to promulgate the final regulations for implementation of the act. This is a short synopsis of the various new rules and proposed rules from the SEC regulating the new JOBS...

As of late, financial headlines have been dominated by economic turmoil and recent default in Greece. Little attention however has been focused on the sudden financial crisis currently gripping China, the world’s most populous country and second largest economy. Since mid-June, Chinese company shares on the Shanghai Composite and Shenzhen Composite have plummeted nearly 30% from their highs, amidst considerable...