Crowdfunding, namely the act of generating capital through very small contributions coming from the general public, has become a key method of significant capital generation for many small companies that do not have access to traditional sources of private capital. As a result, crowdfunding may implicate federal and state securities law concerns. The attorney representing the company seeking the funds will need to ask herself three fundamental questions. First, what is crowdfunding? Second, does the transaction result in the offer or sale of securities? Third, if there is an offer or sale of securities, has the transaction been properly registered or is there an appropriate exemption from registration? The above article above discusses these questions.
The proxy solicitation process is one of the key components to effective shareholder franchise. In principal, it provides shareholders of companies with diversified ownership the ability to exercise their statutory right to vote in an informed and efficient manner, allowing votes to be cast for corporate proposals without the need to attend the annual meeting or special meeting, as the case may be. The solicitation of proxies, while always of consequence, takes on an even larger role in shareholder franchise during a contested solicitation in which a dissident shareholder or group of dissident shareholders are running proposals in opposition to the company’s board of directors. In these instances, it is imperative that all applicable laws are followed in order to afford all shareholders their full and unencumbered voting rights. The laws in question are both state and federal. State law tends to speak in general terms about the power to confer a proxy, the revocability of a proxy, and general form of proxy (“proxy card”). Federal securities law, which is primarily the subject matter of this article, applies when dealing with proxies with respect to securities registered under Section 12 of the Securities Exchange Act of 1934. Such law regulates the process by which proxies are solicited and the various disclosures that must be made with the form of proxy. The article above will provide a very basic guide to non-registrants, i.e. dissident shareholders, who wish to proceed in a proxy contest.
Proxy access has been the darling of the activist shareholder movement for a number of years. Allowing shareholders to include their director nominees with a company’s own proxy materials would greatly reduce the costs associated with effectively running those nominees. Still, companies that are bound by SEC’s proxy rules have been allowed to exclude shareholder nominees from their proxy materials. Using the power granted under Dodd-Frank, the SEC has recently amended Rule14a-8 to make shareholder access to the proxy ballot closer to becoming a reality. The above article discusses the merits of the amended Rule.
In response to what they believe to be a hindrance to capital formation, Representatives David Schweikert (R-AZ) and Jim Himes (D-CT) have introduced a bill in the House that would amend Section 12(g) of the Exchange Act. The amendment, among other things, would change the “500 Shareholder Rule” to a “1,000 Shareholder Rule,” creating more room for growth prior to requiring Section 12(g) registration. The state of the current law and the efficacy of the proposed changes are discussed in the article found above.
In January 2011 Facebook completed a private cash raise of $1.5 billion. The deal was made possible through the creation of a private investment fund owned by Goldman Sachs. The transaction has left open questions of securities liability for private funds and their portfolio companies. For the full article, click on the link above.
Slowly but surely times are changing. As part of the regulatory upswing under the Dodd-Frank Wall Street Reform and Consumer Protection Act, advisers to certain private funds will have to register with and report to the SEC. This means that certain private equity, hedge, and venture capital fund advisers who could have once escaped SEC registration will no longer be so lucky. Although there are still exemptions built into the Dodd-Frank provisions, they are much more restrictive, in terms of who can use them. With the SEC set to announce new rules concerning registration and reporting, it’s time to brush up on the basics and look to the future. As is often the case, time and regulatory law-making waits for no man or woman or, in this case, adviser. For the full article, click on the link above.
An introduction to the Firm.
Institutional investment managers that have investment discretion over $100,000,000 or more in certain equity securities must report those holdings on Form 13F filed through the SEC’s EDGAR system. Under SEC guidelines, an institutional investment manager includes entities that invests in (buys or sells) securities for its own account. Institutional investment managers also include natural persons or entities that exercise investment discretion over the account of another natural person or entity. Institutional investment managers can include investment advisors, banks, insurance companies, broker-dealers, pension funds, and even corporations. The definition is in no way limited to the aforementioned entities.
An institutional investment manager has investment discretion if, directly or indirectly, such manager is (1) authorized to determine what securities shall be purchased or sold by or for the account; (2) makes decisions as to what securities shall be purchased or sold by or for the account even though some other person may have responsibility for such investment decisions; or (3) otherwise exercises such influence with respect to the to the purchase and sale of securities by or for the account as the Commission may determine by rule.
The securities to be reported include both equity securities and certain derivatives of such securities that are specifically listed on a quarterly basis by the Commission. These securities are known as Section 13(f) securities and must collectively reach the $100,000,000 threshold during a specified reporting period. Once the threshold is reached, the Form 13F must be submitted on a quarterly basis for the upcoming year.
Recently the SEC’s Office of Inspector General has brought to the attention of the Division of Investment Management serious failures in the SEC’s monitoring for delinquent filers and review process for those Form 13Fs that are filed. In response, the Division, in working with the Office of Compliance Inspections and Examinations, will be stepping up its enforcement efforts in the coming year. Now is the time to ensure that your clients, some of whom may be filers under Section 13(f), are in compliance with their reporting requirements.
For more specifics on the Section 13(f) filing requirements, including a detailed analysis of particular filing issues and the current SEC objectives, please see “What the Institutional Investment Manager Needs to Know About SEC Reporting under Section 13(f),” at the link above. An executive summary of this white paper is also available above.