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According to Forbes, “The term sheet is one of the most critical documents an entrepreneur can ever design or sign.” A term sheet is a document that results from initial negotiations between the business owner and potential investors prior to selling your stock to outside investors. It is a non-binding contract document, so it is…

Can You Ruin Your Exemption through a General Solicitation of Securities? Section 4(a)(2) of Rule 506(b) provides a “safe harbor” for companies that comply with certain requirements. In addition to a prohibition from using general solicitation to market securities, the requirements of the exemption include: Rule 506 does not expressly limit how many people the…

What is General Solicitation When Selling and Marketing Securities? General Solicitation is the act of marketing a capital raise publicly. Rule 506(b) of Regulation D prohibits the use of general solicitation to market securities. (link: https://www.sec.gov/fast-answers/answers-rule506htm.html) Additionally, Rule 502(c) prohibits: (1) Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar…

The Securities and Exchange Commission suspended trading in the securities of Nevada-based American Retail Group, Inc. (aka Simex, Inc.) after they claimed to be partnered with an SEC qualified custodian for use with cryptocurrency transactions in two August 2018 press releases. The releases reported that the cryptocurrency transactions would be “under SEC Regulations,” and that…

Why you should have a Private Placement Memorandum when raising to accredited investors. There are four principal conditions to a private placement “not involving a public offering” of securities under Section 4(a)(2) and Regulation D, Rule 506; namely: There are two ways to satisfy condition 2 above (Availability of material information); namely: If a private…

General Solicitation General Solicitation is the act of marketing a capital raise publicly. Rule 506(b) of Regulation D prohibits using general solicitation to market securities. General solicitation is undefined in the statutes or rules, and the Securities and Exchange Commission (SEC) takes a case by case approach. A typical example of general solicitation is telling…

Do you need a private placement memorandum for a friends and family capital raise? At first blush, you might think that creating a private placement memorandum can be done without an attorney. All you need to do is talk about the business plan, take the investment money, and then file a Form D with the…

Advantages of Raising Capital with a PPM There are three main reasons to provide potential investors with a full private placement memorandum (“PPM”): (1) to effectively market your company to potential investors; (2) to negotiate with your investors from a position of strength and (2) to protect yourself from liability in the event of a…