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CALIFORNIA CORPORATE & SECURITIES LAW

Staff Releases Report on its Review of the Definition of “Accredited Investor”

On Friday, the Securities and Exchange Commission staff published a report of its review of the definition of “accredited investor”.  Congress directed the SEC to review the definition every four years in Section 413(b)(2)(A) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Below are the staff’s recommendations: The Commission should revise the financial thresholds…

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SEC Staff Declares Performance History Is Not Factual

The Securities and Exchange Commission staff recently issued a series of additional Compliance and Disclosure Interpretations with respect to what might constitute a “general solicitation” under Regulation D.  These interpretations illustrate the logical contortions that must be endured when trying to regulate speech.  After admitting that an issuer may disseminate factual information about itself, the…

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Why The SEC’s Pre-Existing Relationship Test Is The Mirror Image of California’s

One significant condition to California’s limited offering exemption is that all purchasers have a “pre-existing relationship”: All purchasers either have a preexisting personal or business relationship with the offeror or any of its partners, officers, directors or controlling persons, or managers (as appointed or elected by the members) if the offeror is a limited liability…

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CalPERS’ Offbeat Personal Trading Policy

Yesterday’s post discussed a news report of an SEC inquiry into insider trading by CalPERS.  Rather than being abashed by this news, CalPERS responded by congratulating itself on having implemented a personal trading policy. As but one example of the muddle that is this policy, CalPERS defines a “Private Placement Vehicle” as an offering of securities…

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New Rule 506 C&DI’s Require Some Explaining

Nancy Wojtas, the head of the public companies group at Cooley LLP, alerted me to the fact that the SEC staff yesterday issued 14 new Compliance & Disclosure Interpretations (C&DIs) relating to Rule 506 under Regulation D.  Here’s my take on three of them. Question 260.15 Question: If a placement agent or one of its covered control persons,…

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Just Who Is A Promoter And Why You May Want To Know

The California General Corporation Law uses, but does not define, the term “promoter”.  For example, a promoter can be criminally prosecuted.  Corporations Code Section 2251 provides that any promoter “who knowingly and willfully issues or consents to the issuance of certificates for certificated securities, or initial transaction statements or written statements for uncertificated securities, in…

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Should There Be “Bad Actor” Risk Factor?

I’ve devoted several recent posts to the Securities and Exchange Commission’s new “bad actor” rule because it is awash with a sea of troubles for issuers, both private and publicly traded.    The rule prevents issuers from relying on Rule 506 if they are or have been subject to any of a long list of…

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This Picture Is Worth 471 Words (More or Less)

Monday is the big day for the SEC’s “Bad Actor” and “General Solicitation” rule amendments.   I’ve previously observed that many are likely to find the Bad Actor amendments to be bad rules when it comes to compliance.  Today’s blog is devoted to just one interpretational problem with the Bad Actor amendments. Under the SEC’s rule, the disqualification…

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Department Of Corporations Issues Crowd Funding Bulletin

Last week, the Department of Corporations issued this bulletin which it styled as a “Crowdfunding Update”.  The Bulletin makes several important points. Until the Securities and Exchange Commission adopts regulations, there is no federal crowd funding exemption.  It should be noted that Congress mandated that the SEC adopt these regulations by December 31, 2012.  As…

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Chowing Down On The JOBS Act And Ralston Purina

Anyone who has studied securities law has undoubtedly heard of the Supreme Court’s decision in SEC v. Ralston Purina Co., 346 U.S. 119 (1953).  In that case, the Supreme Court struggled with the exemption in the Securities Act of 1933 for “transactions by an issuer not involving any public offering” (now in Section 4(2) but then…

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