An Exemption For Foreign Subsidiary Formation
The formation of a subsidiary under the laws of a foreign country may not seem to implicate the California Corporate Securities Law. Yet, an offer and sale may occur “in this state” within the meaning of Corporations Code Section 25008. See California’s Blue Sky Law Problems for Foreign Issues and Foreign Issuers, 23 Insights 28 (July 2009) and Yes, There Is Read more...
Why Incorporation May Be Unconstitutional
Section 25018 of the California Corporations Code provides a definition of several of the better known federal securities laws: “Securities Act of 1933,” “Securities Exchange Act of 1934,” “Public Utility Holding Company Act of 1935,” “Investment Advisers Act of 1940,” and “Investment Company Act of 1940” mean the federal statutes of those names as amended before or after the effective Read more...
Emptores Caveant! Buyer Liability In Securities Offerings
Much of the focus of securities litigation is on the liability of sellers, but what about buyers? Can buyers prevaricate with impunity? Corporations Code Section 25401 prohibits misstatements and omissions of material facts. Section 25401 explicitly covers persons who “buy” or who “offer to buy” a security. California’s insider trading statute, Section 25402, also reaches purchases. Although not California cases, two Read more...
The NSMIA Didn’t Lay A Preemptive Finger On These Transactions
Last week, I was in Washington D.C. where I served as the moderator of a panel discussion on current securities law issues for small business. As part of my presentation, I discussed the following list of securities transactions that have not been preempted by the National Securities Markets Improvement Act of 1996 (aka the NSMIA): Offers and sales made pursuant to Read more...
Delaware Supreme Court Upholds Federalism, Comity & Finality
In Delaware Court of Chancery “Overrules” Federal Court, I discussed Vice Chancellor J. Travis Laster’s opinion in Louisiana Municipal Police Employees’ Retirement System v. Pyott, C.A. No. 5795-VCL (Del. Ch. June 11, 2012). In that opinion, the Vice Chancellor refused to dismiss a pending Delaware derivative suit after U.S. District Court Judge David O. Carter in the Central California dismissed the plaintiffs’ complaint pursuant to FRCP Read more...
California Bill Would Expand Liability For Securities Fraud, Impose New Fees, Expand Commissioner’s Powers
In late February, Senator Jerry Hill introduced a bill, SB 538, to substantially amend the Franchise Investment Law. A few days later, the bill was read for the first time and set for hearing by the Senate Banking and Financial Institutions Committee on April 3. Then something very fishy happened. Two days before the hearing, Senator Hill gutted the bill and Read more...
Federal Court Sides With Second DCA In Privity Split
In Moss v. Kroner, 197 Cal. App. 4th 860 (2011), the Second District Court of Appeal found that rescission was available to a plaintiff under Corporations Code Section 25504 even though the plaintiff was not in privity with the defendant. Section 25504 imposes liability on specified persons who are in “control” of persons who are liable under Section 25501 (creating the remedies of Read more...
Bill Aims To Free Subversive Organizations From Registration Law And NASAA Shoots For Mandatory Form D Filings
Is It Subversive To Borrow Money From A Foreign Government? The California Subversive Organization Registration Law, Corporations Code Section 35000 et seq., has been on the books for decades. The law purports to require registration any organization that borrows from a foreign government or agency as well as actual revolutionaries. However, the last time I checked, no organization had registered with the California Secretary Read more...
Sunshine May Be Free But It May Take A Security To Harvest It
Harvesting the sunlight as a source of “clean” energy is the dream of many. Although the energy provided by the sun is free, converting that energy into electricity continues to require significant financial resources. One model for local solar energy development is “community shared solar”. Under this model, local consumers invest in the development of a solar energy system. The Read more...
You Might Be Surprised By Who Counts (And Who Doesn’t) In California
Many issuers continue to rely on California’s limited offering exemption to avoid the necessity of qualifying the offer and sale of their securities. The exemption, found in Corporations Code Section 25102(f), requires that sales be made to not more than 35 persons. Thus, it is important to know who counts and who doesn’t. Many out of state attorneys are surprised Read more...
