Securities Lawyers in the USA

It may have been a decade ago, but the fallout of the accounting scandals of the late 1990's and early 2000's continue to resonate through both of the accounting and legal professions. The largely self-regulated accounting profession has enacted numerous changes that continue to evolve in response to the scandals and pressure from government agencies and the public.

As of today, September 23, Securities and Exchange Commission (“SEC”) rules implementing some provisions of the JOBS Act have become effective. Among them is the new Regulation D Rule 506(c).

Since the JOBS Act became law, numerous crowdfunding websites have popped up on the Internet. This month, the first enforcement action was brought against a crowdfunding website.

Private placement offerings under Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”) are a cost effective and relatively quick way for private companies to raise capital before, during and after a going public transaction.

The JOBS Act’s new rules permitting general solicitation and advertising in Rule 506 private placements will become effective on September 23, and there is still some confusion about the difference between crowdfunding and general solicitation and advertising in Rule 506(c) offerings.

Rule 506(c) will become effective in less than a month, on September 23, 2013. The rule fundamentally changes how private placements will be conducted, by allowing issuers to engage in general solicitation and advertising if specific requirements are met. The SEC has confirmed that the Rule 506(c) exemption will not be forgiving for issuers who engage in general solicitation but fail to comply with its requirements.

Companies seeking to raise capital through the sale of securities must either register the securities offering with the SEC or rely on an exemption from registration. Rule 506 of Regulation D is the most widely-used exemption from registration.

Rule 506(c) fundamentally changes how private placements will be conducted, by allowing issuers to engage in general solicitation and advertising if they comply with the Rule’s specific requirements.

Unlike securities listed on stock exchanges such as NASDAQ or the NYSE, securities may trade through the OTCMarkets interdealer quotation system whether they are Securities and Exchange Commission (“SEC”) reporting issuer or not.

Yesterday, FINRA sent a clear message to investors, “medical marijuana legal in almost 20 states, and recreational use of the drug recently legalized in two states, the cannabis business has been getting a lot of attention—including the attention of scammers”.