This post was originally produced for Forbes.
The SEC recently issued new rules for offerings under Regulations A, creating a two tier system that allows issuers to raise up to $50 million without facing all of the requirements of a public offering but potentially providing some of the benefits.
To help readers understand the nuances of the new regulations, I’ve assembled three experts to explain the issues and implications of the new regulations.
Sara Hanks, CEO of CrowdCheck, says, “Regulation A is going to be an effective way for early-stage companies to raise funds from a wide variety of investors.”
“Reg A can’t be done without experienced lawyers, but they don’t have to be expensive,” she adds.
Highlighting the complexities of the law, Hanks notes, “The issuer’s ability to ‘test the waters’ and find out whether there will be any interest in its offering before it spends money on advisors is one of the most helpful aspects of Tier 2 of Reg A. Too bad it doesn’t work for Tier 1.”
“Issuers have to understand the audit requirements for Tier 2. It’s not just the need for audited financials, but they have to be in the format required by Regulation S-X. And the SEC only accepts ‘clean’ audit reports,” she concludes.
Richard has emerged as the global expert in developments in crowdfunding. As a research scholar in the Institute for Business & Social Innovation in the Haas School of Business at UC Berkeley, he is the University’s resident expert on crowdfunding and evolving models of alternative finance. He also organizes the Annual Academic Symposium on Crowdfunding Research. He currently advises the Bill and Melinda Gates Foundation, and works with several other prominent foundations, think tanks, funds and corporations. He is co-author of the forthcoming book Crowdfunding: The Corporate Era, being published in June 2015.
Samuel S. Guzik has more than 35 years of experience as a corporate and securities attorney and business advisor in private practice in New York and Los Angeles, including as an associate at Willkie Farr and Gallagher, a major New York based international law firm, a partner at the law firm of Ervin, Cohen and Jessup, in Los Angeles, and in the firm he founded in 1993, Guzik & Associates. Mr. Guzik has represented public and privately held companies and entrepreneurs on a broad range of business and financing transactions, both public and private. Guzik has represented businesses in a diverse range of industries, including digital media, apparel, health care and numerous high technology based businesses. He is a recognized authority and thought leader on matters relating to the JOBS Act of 2012 and the ongoing SEC rulemaking, including Regulation D Rule 506 private placements, Regulation A+, and investment crowdfinance. He has been consulted by Congressional members, state legislators and the U.S. Small Business Administration Office of Advocacy on matters relating to the JOBS Act and state securities matters. He has also been cited by SEC Commissioner Daniel M. Gallagher on two occasions in public statements, both for his advocacy on behalf of SME’s and his thought leadership on SEC rulemaking and post-JOBS Act reforms.
Mr. Guzik is also a prolific writer on JOBS Act issues affecting entrepreneurs, small and emerging companies, investors and Internet-based funding portals. He is a frequent blogger on his blog, The Corporate Securities Lawyer Blog, addressing developing corporate and securities laws issues. In 2014 he published two major commentaries on JOBS Act rulemaking in The Harvard Law School Forum on Corporate Governance and Financial Regulation: the first article, entitled “Regulation A+ Offerings – a New Era at the SEC,” discussing the SEC’s proposed regulations implementing JOBS Act Title IV Regulation A+; the second article entitled “SEC Crowdfunding Rulemaking under the JOBS Act – An Opportunity Lost?” addressing deficiencies in the SEC’s proposed Title III investment crowdfunding regulations. His articles have also been cited in national business publications on issues relating to federal securities regulation, including, The Economist, Forbes, Bloomberg’s BusinessWeek, Compliance Weekly and Equities.com. Mr. Guzik is also a regular speaker on federal securities matters.
Mr. Guzik is also a founding member of The Heritage Foundation Securities Regulation Working Group, focusing on federal regulatory issues affecting small businesses and emerging growth companies, including ongoing JOBS Act and Dodd-Frank SEC rulemaking. He also served as a member of the Advisory Council of the Crowdfunding Professional Association before being appointed to their Board of Directors in March 2015. He received a B.S. degree in Industrial and Labor relations from Cornell University and is a graduate of Stanford University Law School, and is admitted to practice in both New York and California.
Sara Hanks, co-founder and CEO of CrowdCheck, is an attorney with over 30 years of experience in the corporate and securities field. CrowdCheck provides due diligence and compliance services for online alternative securities offerings. Its services help entrepreneurs and project sponsors through the disclosure and due diligence process, give investors the information they need to make an informed investment decision and avoid fraud and help intermediaries avoid liability.
Sara’s prior position was General Counsel of the bipartisan Congressional Oversight Panel, the overseer of the Troubled Asset Relief Program (TARP). Prior to that, Sara spent many years as a partner of Clifford Chance, one of the world’s largest law firms. While at Clifford Chance, she advised on capital markets transactions and corporate matters for companies throughout the world. Sara began her career with the London law firm Norton Rose. She later joined the Securities and Exchange Commission and as Chief of the Office of International Corporate Finance led the team drafting regulations that put into place a new generation of rules governing the capital-raising process.
Sara received her law degree from Oxford University and is a member of the New York and DC bars and a Solicitor of the Supreme Court of England and Wales. She serves on the SEC’s Advisory Council on Small and Emerging Companies. She holds a Series 65 securities license as a registered investment advisor. Sara is an aunt, Army wife, skier, cyclist, gardener and animal lover.
More about UC Berkeley:
We at CrowdBerkeley believe that fundamental changes in the finance landscape are just beginning to take root. Our goal as an interdisciplinary partnership between the Fung Institute of Engineering, the Center for Social Sector Leadership at Haas, the Finance Group at the Haas School of Business, and the Kauffman Foundation are to deepen the thought leadership, education, and outreach around all things crowdfunding. Our agenda is simple: to learn, educate, and inform in a way that reflects the long-standing tradition of the University of California at Berkeley as a university of innovation.
With the support of the Kauffman Foundation, we are building an extensive repository of crowdfunding data to support research and to inform innovation and policy. Each year, we host the leading academic symposium on the latest research in crowdfunding. And the symposium is just the beginning. Across campus, leaders in business, law, development, innovation and policy are constantly on campus, furthering our education and outreach.
More about Guzik & Associates:
Guzik & Associates, founded by Samuel S. Guzik in 1993 and located in Los Angeles, is a law firm providing a broad spectrum of legal representation in the areas of business, corporate, and securities law. We provide representation to a variety of businesses and individuals in the U.S. and abroad, including start-ups, emerging and established companies, and publicly held NYSE, Nasdaq and OTC listed companies. We also serve as legal counsel to other law firms from time to time on a project or “of counsel” basis.
More about CrowdCheck:
CrowdCheck provides disclosure, due diligence and compliance services for companies and intermediaries making online alternative investment offerings.