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CALIFORNIA CORPORATE & SECURITIES LAW

Are Limited Liability Companies “Persons”?

Limited liability companies did not exist when Congress enacted the Securities Act of 1933 and the Securities Exchange Act of 1934.  Therefore, it should be no surprise that as originally enacted these acts did not mention LLCs.  Congress has since amended both acts and references to LLCs can now be found in both acts.  Section…

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Rule 147 Changes May Cause Uptick In California Securities Qualifications

As has been widely noted, the Securities and Exchange Commission has proposed amending Rule 147 under the Securities Act of 1933.  That Rule provides a safe harbor for compliance with the Section 3(a)(11) exemption from registration for intrastate securities offerings.  Among other things, the SEC is proposing to eliminate the current requirement in Rule 147 that issuers to…

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Court Of Appeal Holds Section 25504 And Section 15 Claims Are Bis In Idem

Section 15 of the Securities Act of 1933 imposes liability on control persons for violations of Sections 11 and 12 of that act.  Section 25504 of the California Corporations Code imposes liability on persons who control persons liable under either Section 25501 (liability for violation of Section 25401 (false statements or omissions) or Section 25503 (liability for…

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“Security” Definitions In CSL And ’33 Act – Similar But Not The Same

Both the California legislature and the U.S. Congress have enacted extensional definitions of “security” – that is Section 25019 of the Corporate Securities Law of 1968 and Section 2(a)(1) of the Securities Act each provides a list of what constitutes a security.  These lists, however, are not the same. Here’s what’s on the California list that isn’t…

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Could The Product Of Two Debts Really Be A Fortune?

In 628 in the Gurjar capital city of Bhillamala (now, Bhinmal, India), the mathemetician Brahmagupta set out to explain how zero and negatives numbers work.  In his book, Brahmasphutasiddhanta, he set forth the rule that the product of two negative numbers (debts) is a positive number (fortune).  Translating this fundamental mathematical concept into the present century, I’m pondering (pondering, not…

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Concurrent Jurisdiction Found For Covered Class Actions

In 1997, I testified at an oversight hearing before the United States Senate Banking, Housing & Urban Affairs Committee regarding securities litigation abuses.  At the time, Congress was considering whether to enact legislation to stop plaintiffs from filing securities class actions in state court in order to avoid stricter federal standards applicable to class action lawsuits.  Both…

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No Form D Filing – Now What?

In 1996, Congress added Section 18 to the Securities Act of 1933 as part of the National Securities Markets Improvement Act (NSMIA) to preempt state qualification requirements with respect to “covered securities”, as defined.  Section 18(b)(4)(D) provides that a security is a covered security with respect to specified types of transactions.  One such transaction is…

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Yes, There is no “S” in California

Regulation S has been available for two decades.  The rule establishes nonexclusive safe harbors for offers, sales and resales of securities outside the United States.   Over the years, many foreign and domestic issuers have relied upon the rule to conduct offshore offerings without complying with the registration and prospectus delivery requirements of the Securities Act of 1933.  As servicable…

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