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Archive | July, 2013

Front Page PR Offers Broker Dealers General Solicitation Campaigns to Market the Oncoming Wave of Equity Crowdfunding Investment Opportunities to the Next Generation of U.S. Accredited Investors

15 Jul

SEC legalizes Crowdfunding marketing, PR and social media campaigns to solicit investments from Reg. D accredited investors, which include, in general, people with a net worth (excluding their residence) of $1 million, income of $200,000 a year (or $300,000 with their spouse), officers and directors of the issuer and various institutions that have more than $5 million in assets

By Robert Hoskins, Front Page Public Relations

Front Page PR announced new turnkey Crowdfunding marketing programs for FINRA-registered broker dealers that want to begin planning advertising, marketing, media relations, PR and social media campaigns to reach a target audience of accredited investors that have remained allusive for the past 30 years due to securities laws.  On July 10, 2013, the Securities Exchange Commission (SEC) voted to lift rules that strictly prohibited the use of mass marketing strategies to promote investment opportunities to potential investors.

Beginning September 2013, leading broker dealers that want to make a big push into one of the most promising financial opportunities in the last eighty years can now begin working with Front Page PR’s team of marketing experts to start planning targeted marketing campaigns to reach this lucrative new audience of prospective accredited investors.


July 10, 2013 SEC Guidelines passed for Crowdfunding and Title II of the 2012 JOBS Act:


“Aggressive broker dealers are already partnering with popular equity crowdfunding sites such as Circleup.com and MicroVentures.com in order to begin marketing to investment early adopters who are joining popular crowdfunding sites in droves,” said Robert Hoskins, Front Page PR’s Director of Media Relations.  “Adding to the crowdfunding marketing opportunity is the pent-up demand that has been building over the past five years as entrepreneurs and small businesses that have been rejected over and over when seeking traditional bank and small business loans.”

“On the flip side of the crowdfunding market opportunity are millions of qualified investors in the U.S who meet the official SEC guidelines to become accredited investors, which can participate in new equity crowdfunding opportunities, but are unaware of their unique credentials,” Hoskins continued.  “These potential investors have large sums of money sitting in their bank accounts, savings plans and 401k retirement accounts because they simply cannot find attractive deals that will provide a decent return on their investment.”

On September 2, 2013, broker dealers will be able to put together marketing campaigns to educate new investors on the potential to invest in lucrative crowdfunding investment opportunities as well as the best strategies on how to find and evaluate good deals that have serious potential as well as time proven strategies on how to identify red flags and eliminate deals that do not.

Front Page PR encourages broker dealers and equity crowdfunding platforms to contact the firm to begin planning marketing campaigns prior to September 2, 2013, the date when the race begins to build new relationships with millions of new accredited investors via mass marketing communication strategies.

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CrowdCheck Offers Crowdfunding Compliance Management for New Reg. D and Accredited Investor Marketing Programs

12 Jul
CrowdCheck CEO Sarah Hanks

CrowdCheck CEO Sarah Hanks

By Sarah Hanks, CrowdCheck’s CEO

Adoption of New Rule 506(c): General Solicitation in Regulation D Offerings

From the CEO’s Desktop:  On July 10 the SEC complied with a mandate in the JOBS Act of 2012 to permit “general solicitation” in private securities offerings. In doing so, the SEC created an entirely new type of securities offering not required to be registered under the Securities Act of 1933. The SEC also adopted rules preventing “bad actors” from participating in private offerings, and proposed for public comment changes to Regulation D and Form D under the Securities Act that are intended to increase investor protection.

Offerings of securities in the United States must be registered with the SEC under the Securities Act or made in compliance with an exemption from registration. Rule 506, part of Regulation D under the Securities Act, is the most used exemption from registration of securities in the United States. The SEC estimates that in 2012 $899 billion was raised in transactions claiming the Rule 506 exemption. New Rule 506(c) Adopted The SEC voted to adopt amendments to Regulation D under the Securities Act to add new Rule 506(c).  Rule 506(c) offerings are technically private placements, made only to “accredited” investors.[1] In the past this has meant not just that accredited investors only could buy the securities, but also that the issuer could offer them to accredited investors only. Under the new rule, small companies and private investment funds and their intermediaries will be able to use “general solicitation” to reach accredited investors, which means they may advertise or publicize an offering on television, in newspapers, and most importantly over the internet. They may talk about the offering on talk shows and webinars, and they may promote the offering on social media. In doing so, however, they will be subject to the anti-fraud provisions of the federal securities laws, which prohibit misleading statements. If the proposals discussed below are adopted, the materials used in general solicitation (which is a very broadly defined concept, including most attempts to condition market interest in an offering) will also be subject to legending requirements. The JOBS Act required the SEC to remove the prohibition on “general solicitation or general advertising,” which has been part of Regulation D since its adoption in 1982, so long as the purchasers in an offering were all accredited.  The way the SEC has implemented this legislative mandate means that there will now be two different types of offering under Regulation D’s Rule 506:

  • Traditional Rule 506(b) offerings, which cannot use general solicitation, but in which up to 35 non-accredited investors can participate so long as they are provided with extensive information about the issuer of the securities, usually in the form of a private placement memorandum or PPM; and
  • New Rule 506(c) offerings, which can use general solicitation, but must be sold to accredited investors only, in which the market will let investors dictate the type of information that they need in order to make informed investment decisions.

The JOBS Act directed the SEC to lift the prohibition on general solicitation provided that all purchasers of the securities were accredited investors and the issuer took “reasonable steps to verify” that the purchasers were accredited, “using such methods as determined by the Commission.”  In its initial proposal the SEC declined to specify even a non-exclusive list of such methods, on the grounds that this would inhibit flexibility in the markets.  However, in the final rule the SEC provided more clarity and established a principles-based method of verification that expects issuers to look at, among other things:

  • The nature of the purchaser and the type of accredited investors the purchaser claims to be;
  • The amount and type of information the issuer has about the purchaser; and
  • The nature of the offering, including the manner in which the purchaser was solicited to participate and the terms of the offering, such as the minimum investment amount.

The SEC makes clear that the issuer should look to the facts and circumstances surrounding the offer and the issuer’s relationship with the investor, and that what will be required to constitute “reasonable steps” will change based on the circumstances. For example, offerings with high minimum cash investments might require less additional investigation than offerings with lower minimums, provided there are no facts to indicate that a third party is financing the purchase. The SEC also provided a non-exclusive list of methods the issuer could use to verify that a natural person meets the accredited investor requirements of 506(c). These methods are:

  • If verifying whether a purchaser qualifies on the basis of income, the issuer may use IRS records that report income (e.g., a Form W-2, Form 1099, etc.) for the purchaser for the two most recent years, along with written representation from the purchaser that they have a reasonable expectation that they will meet the income requirement this year as well.
  • If verifying whether a purchaser qualifies on the basis of net worth, the issuer may use bank statements, brokerage statements, other statements of security holdings, certificates of deposit, tax assessments and appraisals provided by independent third parties, provided the records are no more than three months old. The issuer must also use a credit report to assess the purchaser’s liabilities. The issuer must also get written representation from the purchaser that all liabilities necessary to make a net worth determination have been disclosed.
  • The issuer may rely on written confirmation from a third party that the third party has taken reasonable steps to verify the purchaser’s accredited status. The SEC specifically named broker-dealers, CPAs, attorneys, and SEC-registered investment advisers as acceptable third parties, but also stipulated that other third parties could be acceptable provided they take reasonable steps to verify that purchasers are accredited and the issuer has a reasonable basis to rely on that verification.
  • Finally, purchasers who invested in the issuer in a previous 506(b) offering as an accredited investor and remains an investor in the issuer’s 506(c) raise is deemed to satisfy the verification requirements if the issuer obtains certification from the purchaser that they qualify as an accredited investor at the time of sale.

While the SEC provided these four methods as a non-exclusive safe-harbor, the Commission was clear that these methods would not satisfy the verification requirement if the issuer or its agent has knowledge that the purchaser is not an accredited investor. Proponents of Rule 506(c) offerings believe that they will increase transparency, make it easier for small companies to raise capital and decrease companies’ administrative costs. Opponents argue that Regulation D was already a successful capital-raising mechanism (a recent study by the SEC showed a vibrant Regulation D market raising up to a trillion dollars in over 15,000 offerings a year, mostly in offering sizes under $1 million). They also worry that, in the words of Commissioner Aguilar at the meeting at which the new rules were first proposed, removal of the prohibition on general solicitation would be “a boon to boiler room operators, Ponzi schemers, bucket shops, and garden variety fraudsters, by enabling them to cast a wider net, and making securities law enforcement much more difficult.” Rule 506(c) presents opportunities and threats. Contacting a broader range of investors will become easier, and thus more offerings can be made and more investors can enter the market.  This will combine with the opportunities already presented by the internet to present investment opportunities on a more cost-effective basis, without using an extensive (and expensive) PPM. More intermediaries may enter the market.  But as the SEC pointed out in the release proposing the rules: . . . eliminating the prohibition against general solicitation could make it easier for promoters of fraudulent schemes to reach potential investors through public solicitation and other methods not previously allowed. This could result in an increase in the level of due diligence conducted by investors in assessing proposed Rule 506(c) offerings and, in the event of fraud, would likely lead to costly lawsuits . . . This increased awareness of potential fraud may mean that companies need to do more to establish their legitimacy and that intermediaries will seek to provide meaningful due diligence to distinguish themselves from their competitors. Moreover, liability under the securities laws for misstatements, both for issuers and their intermediaries, has not changed. Any person who makes an untrue statement of a material fact, or omits to state a material fact necessary in order to make the statements that are made not misleading, violates the anti-fraud provisions of securities law. This is true whether the statement is intentional or made recklessly. It is easy to imagine how an entrepreneur might make a thoughtless or overoptimistic statement with respect to his or her company in the informal context of social media. Space-constrained media like Twitter will pose particular challenges to presenting a balanced picture of the investment opportunity. Will the rule change mean that we see hedge funds advertising on late-night TV or Twitter campaigns for investments in startups? The impact of the new rule is likely to be more limited in that respect than some have predicted. Public registered mutual funds do advertise, but those advertisements tend to be staid and contain lots of “fine print” disclaimers prescribed by law; private funds will likely be just as constrained. Broker-dealers putting together Regulation D deals are already subject to FINRA rules with respect to their advertising and social media use, and these requirements have not changed. The anti-fraud laws discussed above should have a tempering effect on any overly-exuberant publicity attempts in either paid or social media. And the SEC will be watching. The SEC has established a “Rule 506(c) Work Plan” involving staff from all across the SEC, who will monitor the new Rule 506(c) market for fraud and compliance and to coordinate with state regulators. The effective date for the new rule will be in mid-September, 2013.[2] Rule 506(c) offerings will only be legal after that effective date.  The SEC views “gun-jumping” very harshly. Proposed Changes to Regulation D, Form D and Rule 156 In the interests of investor protection, the SEC proposed the following changes:

  • Requiring the filing of a Form D in Rule 506(c) offerings at least 15 days before the issuer engages in general solicitation (an Advance Form D). Form D is currently filed no more than 15 days after the first sale of securities in a Regulation D offering.
  • Requiring a closing amendment to Form D within 30 days after the termination (final sale or abandonment) of any Rule 506 offering.
  • Expanding the content of Form D to include website address, information about controlling persons of the issuer, the issuer’s type of business, issuer size, whether the filing is an Advance Form D or a closing amendment, securities identifier, information about the type of investor, and use of proceeds. New items would be added to the form to cover number and types of accredited investor, trading venue, whether a broker-dealer filed general solicitation materials with FINRA, identity of investment adviser (for pooled investment vehicles), the types of general solicitation to be used in 506(c) offerings, and the methods to be used for determining accredited status in 506(c) offerings.
  • Requiring written general solicitation material used in Rule 506(c) offerings to include specified legends and other disclosures. Private investment funds would need to use a special legend disclosing that the investors are not provided the protection of the Investment Company Act of 1940. Failure to use the proposed legends would lead to a disqualification from future Rule 506 offerings.
  • On a temporary basis, requiring issuers to submit written general solicitation materials used in Rule 506(c) offerings to the SEC for the SEC to monitor what sort of communications are being used. The SEC will not make a formal review of these materials, and submission is not a condition to the validity of the offering but non-compliance might lead to unavailability of Rule 506 for future offerings. The materials are not formally “filed” with the SEC and will not be available to the public. Submission would be via an “intake page” on the SEC website.
  • Disqualifying an issuer from relying on Rule 506 for one year if it has not complied, within the last five years, with the Form D filing requirements in a Rule 506 offering.
  • Amending Rule 156, which interprets the anti-fraud provisions of the securities laws in connection with sales communications used by investment companies, to apply to private funds and to mandate additional manner and content restrictions on general solicitation materials used by private funds. The SEC states that private funds “should now be considering the principles underlying Rule 156 to avoid making fraudulent statements in their sales literature” and that private funds are just as much subject to the anti-fraud provisions of the law as investment companies are.

Two points that might not be evident to non-securities lawyers:

  • “Written communications” under the securities law include videos, TV appearances, webcasts, website content, Tweets, Facebook posts and recorded songs about the offering. Anything digital or broadcast. (Rule 405 under the Securities Act.)
  • “General solicitation” is very broad concept and includes any attempt to create a market for the securities being offered.

The SEC stated that it needed further consideration following experience with offerings under the new rule before imposing any content restrictions on general solicitation materials, which several commentators had urged the SEC to adopt. The additional filing requirements are not particularly burdensome, and the legending requirements would reflect best practices even if they were not proposed to be compulsory. Likewise, the changes to Rule 156 reflect the SEC’s interpretation of the law as it stands now. The temporary requirement to submit general solicitation materials could fast become unwieldy both for issuers and for the SEC itself. Current practice in online Rule 506 offerings is to use various media in presenting an investment opportunity to investors, including videos, slide decks, graphic-heavy offering memoranda, due diligence reports and other supporting data. These items are prepared in many different formats. Add to these social media postings and other solicitation items (and it is not clear in what format these are to be submitted) and the opportunity for chaos is limitless. Unless the ”intake page” uses a robust document-handling system able to handle many extremely large files in every format in which it is possible to create documents (and the intake page feeds documents to an equally robust database), failed uploads, long loading wait times and garbled data files are inevitable. The intake page is apparently going to be available for voluntary submissions by the time Rule 506(c) is effective. It is quite possible that the SEC’s experience with voluntary submissions will cause it to rethink this proposal. One striking issue in light of the combination of rules that are adopted and rules that are merely proposed is that in September, companies and funds will be able to generally solicit with fewer restrictions, and then additional restrictions (legends, slightly stricter Form D filing requirements and information submission requirements) will kick in after the proposed rule changes are adopted. The SEC also asks whether the definition of accredited investor should be changed when the SEC is permitted to make such changes, which would not be until July 2014. The proposed changes are now open for a period of public comment, which ends in mid-September. “Bad Actor” Rules Adopted The SEC also adopted its final rules disqualifying “felons and other ‘bad actors'” from taking part in securities offerings made in reliance on Rule 506. The new rules were required by the Dodd-Frank Act of 2010, and the SEC first proposed these rules in May 2011. Prior to this rulemaking, Rule 506 did not impose any bad actor disqualification requirements. In contrast, the bad actor disqualification provisions under Rule 262 of the Regulation A exemption from registration has existed for decades. The new rules are based on the established Rule 262 bad actor disqualification provisions, modified to account for the statutory requirements of Section 926 of the Dodd-Frank Act and how the Rule 506 exemption differs from the Regulation A exemption in practice. The SEC’s new rules are set out in new paragraph (d) of Rule 506. The rules state that the Rule 506 exemption — including both “traditional” Rule 506(b) and new Rule 506(c) offerings — will not be available if the “covered persons” in an offering have triggered a disqualifying event. The new rules apply to a range of people (the “covered persons”) in an exempt offering made under Rule 506(b) or 506(c). On the issuer side, the covered persons under the rules include:

  • The issuer itself, its predecessors, and affiliated issuers;
  • Any director, executive officer, or other officer participating in the sale of securities (or the counterparts for such persons if the issuer is a partnership or LLC);
  • Any beneficial owner of twenty percent or more of outstanding voting equity securities; and
  • Any promoter connected to the issuer company at the time of sale.

With regard to intermediaries, the rule applies to:

  • Any investment manager of a pooled investment fund;
  • Any person who has been or will be paid remuneration for solicitation of investors; and
  • Any director and executive officer (along with the partnership and LLC counterparts) of the investment manager or solicitor.

The “disqualifying events” that will prevent a person from being involved in offerings made in reliance on Rule 506(b) or Rule 506(c) include:

  • Any felony or misdemeanor convictions, within the past ten years (five years for the issuer), in connection with the purchase or sale of any security, involving making a false filing with the SEC, or arising out actions as an intermediary, advisor, or solicitor. The felony or misdemeanor convictions must relate to prior involvement with the offer or sale of a security, interactions with the SEC, or conduct as a securities intermediary. The disqualifying convictions do not include all criminal convictions involving fraud or deceit.
  • Any court order, within the past five years,  which, at the time of the sale of securities under Rule 506(b) or Rule 506(c), restrains or enjoins a person from  engaging in practices in connection with a securities transactions, making false filings with the SEC, or acting as an intermediary, advisor, or solicitor. For disqualification under this item, the person must be subject to the court order; that is, specifically named in the order. Other people who may come under the scope of an order, but are not specifically named, will not trigger the disqualification.
  • Any final order of a federal or state financial regulator that, at the time of the sale of securities, bars the person engaging in the business, or associating with an entity, regulated by that regulator. Additionally, the disqualification is triggered by a final order, within the past ten years, based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct. The applicable financial regulators include a state securities commission, state banking or thrift regulator, state insurance commission, federal banking regulator, the U.S. Commodity Futures Trading Commission, and the National Credit Union Administration.
  •  Any SEC disciplinary order suspending or limiting the activities of a person at the time of the sale of securities. These could be suspensions or revocations of a person’s registration as a broker, dealer, or investment advisor, or limitation on those activities, or a bar from being associated with the offering of penny stock.
  • Any SEC cease-and-desist order, within the past five years, that at the time of the sale orders a person to cease and desist from committing, or committing in the future, a violation of federal securities laws. These cease-and-desist orders arise out of the commission of securities fraud (i.e., knowingly misrepresenting a fact or omitting a fact necessary to make a previous statement not misleading) or making an unregistered, non-exempt offer of securities in violation of Section 5 of the Securities Act.
  • Any suspension or expulsion from a securities self-regulatory organization for any act or omission to act that constitutes conduct inconsistent with just and equitable principles of trade. Securities self-regulatory organizations include registered national securities exchanges, and national securities associations. The rules do not make clear whether a suspension results in a permanent disqualification or only operates during the period of the suspension.
  • Any order to stop or suspend a registration statement or Regulation A offering statement within the past five years. The disqualification applies to any filer or named underwriter, and extends to parties that are under investigation by the commission at the time of the Rule 506(b) or Rule 506(c) securities offering.
  • Any Postal Service false representation order within the past five years, or temporary restraining order or preliminary injunction at the time of the sale of securities.

A covered person that is subject to a disqualifying event has the ability to petition the SEC and show good cause as to why the disqualification should not apply. The SEC notes specific situations where this may occur, such as a demonstration that a court order was entered without the person having an opportunity to challenge the order. Additionally, the disqualification event will not apply if the relevant court or regulatory authority indicates that the judgment or order should not bar the person from participating in a Rule 506(b) or Rule 506(c) securities offering. The rules also create a reasonable care exception for the issuer.  Under that exception, the issuer may establish that it did not know, and even in the exercise of reasonable care, could not have known that a covered person triggered a disqualifying event. The standard for reasonable care includes the issuer’s factual inquiry into whether any covered person triggers a disqualifying event. The requirements for a factual inquiry vary according to the issuer’s situation. An issuer with only a few executive officers and directors may be expected to have knowledge of its own covered persons.  Factual inquiries on intermediaries may be done by questionnaires, certifications, and background investigations, accompanied by contractual representations and covenants. The factual inquiry should be done at a time that allows the issuer to have a complete and accurate understanding of the absence of disqualifying events at the time of the securities offering.  As such, the inquiry should be done as close to the offering as possible without being unduly burdensome.  Further, ongoing or long-lived offerings may require additional factual inquiries done on a reasonable basis. The rule is designed to phase in after it becomes effective in mid-September, 2013.  Disqualification will only result from disqualifying events that occur after the effective date of the new rules.  Nevertheless, any disqualifying events triggered by an issuer or covered person that occurred prior to the effective date are subject to mandatory disclosure to potential investors.  It is conceivable that failure to disclose a past disqualifying event could result in the finding of securities fraud, which would then trigger the disqualification from reliance on Rule 506(b) or Rule 506(c) in future securities offerings. These new rules impose substantial requirements on issuers and intermediaries relying on the Rule 506(b) or Rule 506(c) exemptions from registration of securities.  Principally, issuers must establish that they have exercised reasonable care to discover whether any of the parties to a securities offering disqualify the issuer from utilizing the exemptions.  If a covered person triggers a disqualifying event, and the issuer fails to exercise reasonable care, that could lead to further securities law violations, triggering additional disqualifying events for the issuer, and thereby severely limiting access to the capital markets. * *** The following table compares the principal attributes of traditional placements under Rule 506, new Rule 506(c) offerings and offerings made under Rule 506(c)’s cousin, crowdfunding.  The SEC has not yet proposed its rules for crowdfunding, so additional restrictions are likely.

 Rule 506(b) offerings (traditional Regulation D)  New Rule 506(c) offerings  Crowdfunding (when legal)
Solicitation: Marketed directly to known investors without “general solicitation”; no internet solicitation Marketed over the internet; TV, advertisements and solicitation on social media permitted Marketed over the internet, but primary solicitation and disclosure happens on “funding portal”; publicity anywhere else (including social media) is restricted
Eligible issuers: Both SEC-registered and private companies can use exemption Both SEC-registered and private companies can use exemption Only companies not registered with the SEC can issue
Eligible investors: Up to 35 non-accredited investors permitted; no limits on accredited investors Only accredited investors may buy No restrictions on type of investors but they must show they understand their investment and are limited in dollar amount
Ascertaining investors’ status: Accredited investors typically self-certify Issuer may use various methods to “verify” accredited status; non-exclusive list of methods that may be relied on as meeting requirements Proposals to come
Offering size: No dollar limit on offering size No dollar limit on offering size $1m limit on offering size; SEC may decide not to include sales to accredited investors in that limit
Disclosure: Private Placement Memorandum typically used although not required if all investors are accreditedFiling Requirements: Form D (very short form with issuer and intermediary identity and offering description but no substantive disclosure) filed after offering starts Disclosure driven by market demands and liability concernsProposals would require earlier filing of Form D and additional amendment after closing; general solicitation materials proposed to be submitted informally to SEC Disclosure (including reviewed or audited financial statements) mandated by statute; additional disclosure likely to be mandatedFiling required with SEC; form to be determined
Liability: Liability under general Rule 10b-5 anti-fraud provisions for any person making untrue statements Liability under general Rule 10b-5 anti-fraud provisions for any person making untrue statements Rule 10b-5 liability plus Section 12(a)(2)-type liability for issuer, its officers and directors and anyone “selling” (including promoting) the offering
Resales: Securities are “restricted”; cannot be freely resold Securities are “restricted”; cannot be freely resold Very limited resales permitted for one year; may be designated “restricted” by SEC
Intermediaries: Intermediaries not required; any intermediaries used must be registered broker-dealers or entities exempt from B/D registration (such as VC Funds) Intermediaries not required; any used must be registered broker-dealers or exempt Intermediaries are compulsory; can be funding portals or broker-dealers

Need help making sure your Broker/Dealer or Crowdfunding Platform is meeting the new Crowdfunding compliance guidelines, contact CrowdCheck at:

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CrowdCheck provides due diligence and disclosure services for online investments, including Regulation D offerings.  We help platforms and issuers ensure that their offering satisfies legal and industry requirements, including the new “Bad Actor” rules and ensuring that issuer statements are accurate and not misleading.  CrowdCheck also provides investors with the tools they need to avoid fraud and make an informed investment decision.  We combine “hands on” and high tech to create a right-sized yet powerful product that works with the reality of small businesses and needs of investors.  For more information please contact us at info@crowdcheck.com or visit us at www.crowdcheck.com.  The above does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice.


[1] Accredited investors include, in general, people with a net worth (excluding their residence) of $1 million, income of $200,000 a year (or $300,000 with their spouse), officers and directors of the issuer and various institutions that have more than $5 million in assets. The SEC is considering revising these standards, although it cannot make any revisions until July 2014.
[2] 60 days after publication in the Federal Register, which has not yet occurred.

Mary Jo White, SEC Approves JOBS Act Requirement to Lift General Solicitation Ban on Crowdfunding for Accredited Investors

10 Jul

SEC Eliminates the Prohibition on General Solicitation and General Advertising in Certain Crowdfunding Fundraising Offerings

By Robert Hoskins

The Securities and Exchange Commission today adopted a new rule to implement a JOBS Act requirement to lift the ban on general solicitation or general advertising for certain private securities offerings.

SEC Approves JOBS Act Requirement to Lift General Solicitation Ban

SEC Approves JOBS Act Requirement to Lift General Solicitation Ban

New SEC Rulemaking on Crowdfunding Guidelines for General Solicitation for Accredited Investors

Rule 506

The final rule approved today makes changes to Rule 506 to permit issuers to use general solicitation and general advertising to offer their securities provided that:

  • The issuer takes reasonable steps to verify that the investors are accredited investors.
  • All purchasers of the securities fall within one of the categories of persons who are accredited investors under an existing rule (Rule 501 of Regulation D) or the issuer reasonably believes that the investors fall within one of the categories at the time of the sale of the securities.

Under existing Rule 501, a person qualifies as an accredited investor if he or she has either:

  • An individual net worth or joint net worth with a spouse that exceeds $1 million at the time of the purchase, excluding the value (and any related indebtedness) of a primary residence.
  • An individual annual income that exceeded $200,000 in each of the two most recent years or a joint annual income with a spouse exceeding $300,000 for those years, and a reasonable expectation of the same income level in the current year.

The determination of the reasonableness of the steps taken to verify an accredited investor is an objective assessment by an issuer. An issuer is required to consider the facts and circumstances of each purchaser and the transaction. Nevertheless, in response to commenters’ requests, the final rule provides a non-exclusive list of methods that issuers may use to satisfy the verification requirement for individual investors.

The methods described in the final rule include the following:

  • Reviewing copies of any IRS form that reports the income of the purchaser and obtaining a written representation that the purchaser will likely continue to earn the necessary income in the current year.
  • Receiving a written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or certified public accountant that such entity or person has taken reasonable steps to verify the purchaser’s accredited status.

The existing provisions of Rule 506 as a separate exemption are not affected by the final rule. Issuers conducting Rule 506 offerings without the use of general solicitation or general advertising can continue to conduct securities offerings in the same manner and aren’t subject to the new verification rule.

Rule 144A

Under the final rule, securities sold pursuant to Rule 144A can be offered to persons other than QIBs, including by means of general solicitation, provided that the securities are sold only to persons whom the seller and any person acting on behalf of the seller reasonably believe to be QIBs.

Form D

The final rule amends Form D, which is the notice that issuers must file with the SEC when they sell securities under Regulation D. The revised form adds a separate box for issuers to check if they are claiming the new Rule 506 exemption that would permit general solicitation or general advertising.

What’s Next

The rule amendments become effective 60 days after publication in the Federal Register.

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Tyger Gilbert Launches “Reinventing Civilization” Crowdfunding Campaign on Indiegogo in Phoenix, Arizona

6 Jul

Overcoming the “Insanity of Humanity” by Choosing Ways to Survive Together as Individuals Without The Use of Force

Reinventing Civilization by Overcoming the Insanity of Humanity

Reinventing Civilization by Overcoming the Insanity of Humanity

Howdy,

My name is Tyger Gilbert.

I’m a writer, artist, photographer, web designer and programmer, and I live in Phoenix, Arizona. I’ve been here since right after dirt was invented out in the Sonoran Desert and I’ve seen a lot of things happen over the years. I’ve been blessed and cursed with an IQ that is in the top 1% of the population, and it has made me see things very differently from most people a lot of the time.

Because of this, I’ve felt like an outsider looking in for much of my life, but by a great deal of introspection, I have come to realize that a lot of people feel this way about many aspects of their lives, too. My ongoing fascination with philosophies of the world throughout history has also produced unexpected but valuable conclusions on common perceptions and how things really are.

You and I probably agree on a lot of thoughts, attitudes, and beliefs about how the world is being run these days. I get really angry when I watch the nightly news or read about all the wars, the hunger, sickness, and protests all over the globe. I feel so helpless that I can’t do anything to stop all the pain and suffering I see. I am very disappointed that none of the prominent religions seem to provide answers to these problems, and in fact are often the cause of them. I get frustrated by all the promises made by politicians everywhere who say they will find and implement solutions, but never do. I suspect you often feel the same as I do about these conditions.

The world is still rampant with wars, hunger, violence, and sickness even in this modern age.

If you do feel upset by these things, I hope you will help me with this book I’m writing that I believe provides workable answers and reveals ways you or anyone else can put them into action to benefit a lot of people. People you love and want to see happy. And you will be able to use these revolutionary new concepts that I describe to achieve your own personal freedom as well.

This book is the culmination of many years of philosophical analysis and soul searching for me. I disagreed with much of what I was taught by my parents and teachers in school because it just didn’t make sense to me. I struggled with that most of my life until just a couple years ago when I realized that most everything I had been taught was wrong! And it was not that my parents and teachers and everyone else meant to deceive me, it was that what they were taught and believed is not how things really are, not then, and surely not today.

Civilization favors the wealthy with power, privileges, and opportunities

I now recognize that civilization is structured in ways that are inherently corrupt and immoral. It openly favors only select groups with power and privileges while sentencing the bulk of humanity to virtual slavery, requiring them to suffer a basic, minimal existence in order to support and serve the interests of the wealthy. Creative thought and individuality are suppressed in favor of the opinions and the dictates of the ruling elite. Elections change who makes the rules of the game of Life, but they never significantly alter how the game is played. Those who benefit from this arrangement do not want to see things be any different, but if you are like me, the way many things are being done just isn’t right to you.

How to fix those things is surprisingly simple, however.

Most of the world’s population lives in abject poverty

Religion and politics have failed to provide workable answers to the problems of wars, violence, sickness, starvation, and most other forms of human misery for more than the last 2000 years. I say it’s time to start doing things differently and choose some alternatives to these institutions.

All the governments and different religious belief systems cause more pain and suffering in the world than they cure or prevent. They create lots of impressive buildings, but despite their best efforts, neither has adequately provided what is really needed for anyone but the rich and powerful. With the world’s population at over seven billion and growing exponentially, the problems quickly will get far worse than anyone can imagine.

Governments and religions have built lots of big fancy buildings, but haven’t ended human suffering.

Air pollution, a lack of clean water, trash everywhere, the destruction of natural forests, changes in climate and weather, crop failures, extreme overcrowding, and vastly inadequate food supplies are devastating the human condition today, never mind what horrible things will likely happen in the future. Though science and technology have made some people in advanced countries more comfortable and extended their life expectancies, the incredible, senseless suffering of humanity continues throughout most of the world.  Why?

Overpopulation is destroying the environment everywhere throughout the world today. 

The reasons are rooted in the very nature of the human species. Civilization was founded on the formation of groups and the use of these groups to control and develop resources for the benefit of the group. Leaders of groups wanted to exert control over the thinking and behavior of individuals in the group so they could ensure they got the results they wanted. Loyalty was essential, and dissent was overcome by the use of force. Apparently, leaders today don’t see how these ways aren’t working well in modern times, as they persist in trying to use bigger and bigger groups as their tools for everything.

        
Politicians . . .You see one, you’ve seen them all . . . because they all are essentially the same.
        

The right solutions to these problems will come from placing the needs of the individual above or equivalent to the needs of the group, and from recognizing and valuing individuals as being important to everyone. Control of actions and motivation to perform for the benefit of a group must come from within each person. Good thoughts and behavior can not be externally imposed by group rules which require compliance through threats and intimidation and the use of actual physical force. That just fails miserably in so many ways.

Good thinking and behavior cannot be imposed on others through the use of force

The wonderful idea of personal freedom and independence is a fairly recent development for Mankind as it requires critical thinking to override natural instincts and ages of mental conditioning. That’s not widespread, yet, but easy to accomplish once old habits of compliance are abandoned and hope sets it. New social values can be established the same ways existing values always were – by friendly discussion, comparison of personal values and needs, and common agreement among individuals. Violence and use of force do not have to be part of the equation

This book describes the philosophy of Individualism for true personal freedom and provides practical ways to implement it in a society that is brainwashed to socialism and total control by governments at all levels. It emphasizes the necessity for voluntary cooperation – not compulsory obedience – to satisfy the needs of civilization at large and fulfill the desires of every person in it. The logic and morality of the methods advocated are substantiated with examples from the ways the world currently works and are demonstrated to be realistic. They aren’t just ideas I came up with all by myself. Several well-known and respected philosophers and writers like Henry David Thoreau, Ayn Rand, Max Stirner, William Godwin, and Benjamin Tucker have all embraced Individualist beliefs and have been a great inspiration to me.


Henry David Thoreau

Ayn Rand

Benjamin Tucker

Slavery was once condoned by various governments but it is now illegal and unacceptable everywhere. This major change in social values didn’t happen overnight, but gradually people realized the horrible immorality of it and now consider it an extremely reprehensible practice.

New concepts like “voluntary taxation” or “free participation” are rejected by many people as being unworkable because equal contributions and the allocation of benefits cannot be enforced, and the redistribution of wealth cannot be directed and controlled by the politicians. Yet, these methods are in use in many places in many ways today and are actually quite feasible for making good things happen. Their perceived weaknesses are actually their strengths that make them fair and usable for everyone, not just the powerful.

Slavery was accepted for most of human history, but attitudes about it have changed drastically.

Crowd funding is an example of how projects can be financed voluntarily and without the use of force. Instead of some politicians or bureaucrats, the people who are providing the money are the ones who decide which projects are funded and get done and which do not. Can you imagine if citizens could directly decide what their government taxes would support? A lot of wars might never be started, never mind go on for years and years.

Revolutionary ideas like these can be implemented right now by injecting them into the functionality of governments and large corporations the world over and eventually will prove to be more equitable and humane ways of handling the interpersonal relationships of people than direct force and coercion. No matter what your political or religious beliefs are now, these universal concepts will work for you.

People everywhere are happier when they can choose what they want for themselves. 

It’s time to move from an authoritarian-based society, one that imposes rules and causes damage and suffering when it enforces laws with strict penalties for non-conformance, to a society that is peer-based and works well because it is built on values and sound principles. This will motivate people to participate and perform in ways that are good for everyone. People are happier and a lot more productive when they do things because they want to, not because they have to do them. The freedom to choose is what enables this, and making the game a win-win-win situation is how multiple beneficial choices are created for every player in the game and success becomes the only alternative.

    
The ability to communicate, spread ideas, and change attitudes has never been greater than now
    

I don’t expect to “save the world” with this book, but I can help point the way toward a better way of living for a lot of people by influencing how they choose to value themselves, other people, and Nature itself – by simply “changing one attitude at a time.” Great ideas, when successfully put into action, will spread faster today than at any other time in history, and they can quickly become the accepted way of thinking. I’ve been working on these concepts for a long time, and the details are finally coming together. With the popularity of social media and networking at a high point, the precarious state of the global economies, and general dissatisfaction with all forms of governments now, I believe it is the right time for this book to have a meaningful and significant positive impact.

It will take more than hoping and praying to bring about significant changes for Humanity

Wishing things were different won’t change anything. The human race is in a desperate situation. It will take some effort by everyone who recognizes action is needed before it is too late to have any meaningful effect. Don’t just keep making the same mistakes over and over, letting someone else decide and control your life, all so you can barely get by while they become more wealthy. Join me NOW and help make this book become a source of inspiration and guidance to stop the march of all of civilization toward the extinction of mankind.


The time is right for this – it needs to happen NOW!

Please contribute what funds you can today, and then give me your opinions and criticisms as I complete the writing of this very important book. If you like this presentation, which is a good example of how I think and write, and if you agree with even half of what it says, you will love the book. It will be much more comprehensive and include lots of examples of how things can be improved and even drastically altered for the good of everyone by making only small but significant changes to how things are structured and done. I assure you that you will be glad you contributed to it and proud you were a part of its creation.

– Tyger Gilbert

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