Securities Law 101

Kansas Adopted the First

Securities Law in 1911

Federal securities laws were

adopted in 1933 and 1934

Accredited Investor

• At least $1 million in net worth excluding primary residence or

• $200,000 in annual income

• $5 million for entities

Rule 501(a)

The 100%

Types of Investors

Professional

investors

0.3%

Non-

professional investors

99.7%

1.Do you want to be able to publicly

advertise?

2.Accredited investors only or everyone?

If everyone, how many unaccredited?

3.How much do you want to raise?

4. In what states are your potential

investors located? (just one? A few? All

of them?

Three categories of securities

offerings:

1.Private offering

a. to both accredited and

unaccredited

b. to accredited only

2.Public offering to accredited only

3.Public offering to both accredited and

unaccredited (aka Direct Public

Offering or Investment Crowdfunding)

1. Private Offerings

• No public advertising – mass emails, press

releases, social media, announcement on

web site, publicly advertised events . . .

• One-on-one conversations – doesn’t

necessarily mean you have to know

people

• Many lawyers will say accredited only,

but . . .

Recompose (Seattle) – Raised about

$500,000 so far – nonvoting preferred stock

Business is currently illegal!

2. Public Offering for Accredited

Investors – Rule 506(c)

• Unlimited public advertising

• You must do due diligence to ensure all

investors are accredited

• File Form D

• Created by Title II of the JOBS Act

•Platforms available e.g. Circle Up

3. Direct Public Offering aka

Investment Crowdfunding

Option 1: State Level Registration

• This has been available for

decades

Raised about $800,000

Nonvoting preferred stock

Based in Berkeley, CA

State Crowdfunding Laws

Option 2: Regulation A/A+

• Tier 1: up to $20 million state by state

registration; no audit required

• Tier 2: up to $50 million; no state

registration; audit required; state notice

filings may be required

• For both: “mini registration”

• Made possible by Title IV of the JOBS Act

Option 3: Crowdfunding Exemption

(Title III of the JOBS Act)

• No state level filings required

• Max raise: up to $1,070,000 per year (amount

increased regularly to keep up with inflation)

• Offerings must be conducted through a

registered intermediary

Crowdfunding Exemption

(Title III of the JOBS Act)

• Per Investor Cap:

• The greater of $2,200 or 5% of the lesser of the

investor’s annual income or net worth if either the

investor’s annual income or net worth is less than

$107,000; or

• 10% of the lesser of the investor’s annual income or

net worth, not to exceed an amount sold of $107,000, if both the investor’s annual income and net worth

are equal to or more than $107,000

• You can rely on the efforts of the platform

Crowdfunding Exemption

(Title III of the JOBS Act)

• More than $107k – reviewed financials

• Financials are public

• Annual reporting requirements – only one

report required if fewer than 300 holders of

record of the class of securities offered

• Investors can back out at the last minute

Crowdfunding Exemption

(Title III of the JOBS Act)

• File Form C

• There are limitations on what you can say

outside of the platform

Title III Platforms

Spotlight: Girls, Oakland, CA

Raised about $500,000 – equity and debt