By Lauren Mack Companies seeking to raise capital – whether through selling equity, convertible notes, or any other security – in the United States must navigate a complex landscape of securities laws and regulations. They are subject not only to federal regulations, but also the laws of each state in which an investor (or soon-to-be investor) resides. The general rule under federal law is that …
Private Placements under FINRA Scrutiny
Peter Tyson and Simon Riveles The Financial Industry Regulatory Authority (“FINRA”) announced in its Annual Regulatory and Examination Priorities Letter from January 11, 2013 that it would prioritize policing private placements in 2013. Of particular concern to FINRA is enhancing its risk-based supervision of the private placement market, and addressing inadequate disclosures and due diligence procedures, which can mislead and/or harm investors. FINRA’s announcement is …
Private Offerings in New York: How an “Integration Clause” bars an Investor from Relying on the Offerors’ Representations
By Kaiser Wahab, Counsel Anyone in business should be careful to note whether their contracts contain “integration clauses.” A so called integration clause makes the contract “king” in terms of the promises and representations of a party to a transaction. In other words, if there is an integration clause in a contract that says “X”, even if one party may have orally maintained “Y” throughout …
Easing the Ban on General Solicitation
As Congress grapples with ways to kick start the economy and spur small business growth and hiring, one proposal gaining momentum is to relax or even eliminate the long-standing ban on general advertising or solicitation imposed on private companies seeking to raise capital under the private placement rules of Reg D of Section 4(2) of the 1933 Securities Act.
Finders Exception to Broker-Dealer Registration in the Capital Introduction Space
As competition for capital has steadily increased for private companies and private funds, issuers and managers have turned to the services of third party marketers (“TPMs”) to raise capital or sell their funds to prospective investors. In the hedge fund space, TPMs typically demand an exclusive arrangement with the fund and approximately 20% of all fees. But due to the nature of their services and …