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CALIFORNIA CORPORATE & SECURITIES LAW

Something Appears To Be Awry With California’s Insider Trading Statute

I trust that by now most quotidian readers of this blog should be familiar with Corporations Code Section 25402 which declares insider trading to be unlawful.  Although the statute has been on the books since the enactment of the Corporate Securities Law of 1968, it doesn’t make a great deal of sense.  Here’s the unabridged text of the statute: It is…

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Negotiating Permits?

The title of yesterday’s post may have been a bit recondite for some readers as I never directly mentioned negotiating permits in the post.  Therefore, today’s post will back up a bit and fill in some of the missing pieces. As noted yesterday, the California Corporate Securities Law prohibits offers of securities by issuers unless the…

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A Permit To Negotiate – Really?

It is sometimes forgotten that the California Corporate Securities Law of 1968 makes it unlawful to either offer or sell a security in California in an issuer transaction unless that the sale has been qualified or exempt from or not subject to qualification.  Cal. Corp. Code § 25110.  Thankfully, the CSL exempts most offers.  Today’s…

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Shares of Foreign Subsidiaries

I expect that little or no thought is given to the possible application of California’s Corporate Securities Law of 1968 when a corporation incorporates a subsidiary under the laws of a foreign country.  However, the issuance of shares to a corporate parent located in California may well involve the offer and sale of securities in California.  As…

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California’s Regulation A Notice Filing Requirement

Two years ago, I posed the question: Will California Require Notice Filings For Regulation A Offerings?   Corporations Code Section 25102.1(a) provides that offers and sales of to “qualified purchasers”, as defined by the Securities and Exchange Commission pursuant to Section 18(b)(3) of the Securities Act, are not subject to qualification under the Corporate Securities Law.  However,…

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California Lags Behind The SEC In Permitting Testing Of The Waters In Regulation A Offerings

In 2015, the Securities and Exchange Commission adopted amendments to Regulation A and other rules and forms to implement Section 401 of the Jumpstart Our Business Startups (JOBS) Act.  One significant enhancement to Regulation A was to permit issuers and persons acting on their behalf to “test the waters” with all potential investors and to use solicitation…

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New Rule 147A And Amendments To Rule 147 Are Now Effective

Last October the Securities and Exchange Commission adopted amendments to Rule 147 to modernize the safe harbor under Section 3(a)(11) and a new intrastate offering exemption, Rule 147A.  See Will New Rule 147A Lead To A Renaissance In California Permit Applications?  These changes took effect on just over a month ago – on April 20, 2017. …

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Scienter Requirement May Be A Question Of Timing

On several occasions, I have written about whether scienter is required under Corporations Code Section 25401.  That question surfaced again last week in Judge Gonzolo P. Curiel’s ruling on the defendants’ motion to dismiss federal and state securities law claims in Mueller v. San Diego Entm’t Partners, LLC, 2017 U.S. Dist. LEXIS 77643 (S.D. Cal.…

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Federal Judge Rules Out Private Cause Of Action Under California Control Person Statute

Some persons may be deemed to violate the Corporate Securities Law of 1968 even though they did not directly violate the law.  Corporations Code Section 25403(a) provides that a person who with knowledge directly or indirectly controls and induces any person to violate any provision of the CSL or any rule or order thereunder is deemed to be…

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Qualification Of Offers And Sales Of Non-Voting Common Stock Is No Snap In California

In March, Snap Inc. announced that it and the selling stockholders had sold of 230 million shares of Class A Common Stock to the public at an initial public offering price of $17.00 per share.  The gross proceeds of the offering to the company and its selling stockholders was $3.91 billion. Even successful offerings have…

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