One of the easiest ways to raise money for a venture is to structure the raise in such a way that the securities laws do not apply.  To do this, it is necessary to be very familiar with the definition of a security.  If an instrument does not meet the definition, there is no need [...]

Colorado has two exemptions from the general requirement that securities offerings must be registered that can be useful for social enterprises. First, a cooperative formed under the law of any state that sells securities to its members in Colorado is exempt from the Colorado registration requirement.  (Note that it will still be necessary to qualify [...]

Before a company can solicit investments from the public, it must register the offering in the states where the offering will be made (and must also complete federal securities compliance).  Most states in the United States accept the SCOR (also known as U-7) form as fulfilling this state level registration requirement.  The SCOR form was [...]

Rule 504 is known as an exemption from the requirement of federal registration of a securities offering under Regulation D. In its more familiar incarnation, it is an exemption that allows a company to offer up to $1 million in a private placement (assuming state law compliance) – which means that the company cannot do [...]

The state of California is prosecuting a movie producer that solicited loans to finance movie productions.  This case makes it clear why the securities laws do not exempt loans, even though (or maybe because!) loans sound like a safer investment. According to the Attorney General’s press release, “More than 150 individuals from across the country [...]

Let’s say you decide to do a private placement of securities under the federal exemption from registration requirements Regulation D, Rule 504.  Under Rule 504, you can raise up to $1 million.  Let’s say you raise $950,000 under this offering. Two months later you decide to do another securities offering under Rule 504 and your [...]

When talking to potential investors for your business, if you offer an investment to anyone other than an “accredited investor,” there are lots of disclosure requirements that can be quite expensive to comply with.  That is why savvy small business owners need to check on whether their potential investors are accredited or not.  Unfortunately, offering [...]

A private placement is a fundraising strategy that is exempt from the full securities registration process and therefore much simpler and cheaper to do within the law.  The basic rule of private placements is that you may not solicit investment from the general public – you can only solicit people you already know.  Generally, you [...]

Excerpted from a memo authored by Kathleen Kenney, U.C. Davis School of Law third year student and Sustainable Economies Law Center summer intern Under the intrastate exemption (Section 3(a)(11) of the Securities Act of 1933), an issuer is exempt from the federal securities registration requirements.  To be eligible for the exemption, all investors must reside [...]

Summarized from a memo by Christen Lee, Esq. The following are characteristics that will make it more likely that a court will consider an instrument to be a security, and therefore subject to securities regulations: the right to receive dividends contingent upon an apportionment of profits; negotiability (i.e., transferability); the ability to be pledged or hypothecated [...]