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Tag Archives: Accredited investor

What were they thinking…

First, I must apologize for the dearth of information on the public markets and financing techniques therein over the last four months coming from our BLOG.  Our associated group of organizations (Rhodes Holdings LLC, ReCap Marketing & Consulting LP, and American Equity Fund LLC) have been involved in a number of actions to protect shareholder value as well as having been asked to put together a number of “go public” projects for clients.  With that said, expect a new focus on providing a look into what is going in the public markets…

OTC Markets

Since the Jumpstart Our Business Startups Act (“J.O.B.S.“) Act was signed into law on April 5, 2012, there has been a “promise” in the air that it would help get capital formation for the micro-cap market started again.  This really hasn’t happened since the Congress and President can’t seem to get their acts together (pun intended), and the Securities & Exchange Commission (“SEC“) hasn’t released the details on how it will enforce the J.O.B.S. Act provisions, like changes to internet marketing of stocks (general solicitation).

OTC Markets Group Inc. had hoped that this Act would help drive their business, but alas FINRA is all about limiting the markets that OTC Markets Group Inc. serves by making it impossible to deposit shares in Pink Sheet companies as well as OTC:BB companies.  The crux of the problem that those of us working in the

Seal of the U.S. Securities and Exchange Commi...

Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

micro-cap arena are facing is that even if you follow all the rules (register your shares, pay cash for stock, etc.), the broker dealers and their compliance departments are running scared of the SEC and FINRA’s rules, so stock just doesn’t get sold.  If no stock gets sold, that capital doesn’t get re-invested into other micro-cap stocks – thus, the velocity of money associated with micro-caps has ground to a halt.  Read what OTC Markets Group Inc. has to say:

In a few cases, it has eased regulation and shown that at least some of those in Congress listened.  The J.O.B.S. Act did make it so that issuers did not have start filing SEC mandated disclosure statements (10Q, 10K, 8K, etc.) until they reach 2,000 shareholders – previously it was 500 shareholders triggered filing requirements.  Read CFO magazine‘s article on banks de-registering:

All in all, the J.O.B.S. Act has not helped us reach its stated goal – helping jump start capital formation.  It may still help, but those of you who thought that crowd funding was going to take over capital formation, it hasn’t delivered the goods.

Accredited Investors

The J.O.B.S. Act did make some changes to the accredited investor definition, which would be very helpful.  The original 1933 Act definition is as follows for Rule 501 definitions.  Here is what the General Counsel of Second Markets had to say about the proposed implementation in his letter to the SEC.  In general, we at Rhodes Holdings LLC are keeping track of what is happening in the marketplace that will make it easier for our clients to access the capital they need.  Here are some websites associated:

 
 

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Crowdfunding, JOBS Act, and creative project funding…

JOBS Act – Title II, III and IV Explained

Title II of the JOBS Act has reversed rules on general solicitation and advertisement of a Rule 506 offering, as long as all ultimate purchasers are accredited investors. Within 90 days following enactment of the law, the Securities and Exchange Commission must revise Rule 506 to provide that Rule 502’s limitations on solicitation and advertisement do not apply to Rule 506 transactions involving accredited investors only. This makes the identification of accredited investors especially significant. Prior to the JOBS Act, purchasers have been allowed to self-certify that they qualify as accredited investors. In a departure from this long-approved practice, however, the JOBS Act provides that issuers are now required to take “reasonable steps” to ensure investors purchasing securities through a Rule 506 offering are “accredited investors.” It remains unclear what steps the SEC will require from issuers to verify that purchasers under Rule 506 are actually accredited investors. According to the 14 Law Firm Consensus Report released on April 5, 2012, the current version of Rule 506 will remain in effect until the SEC puts forward the new rules.

Read More at http://ppmlogix.com/blog.  This article was written by Michael T. Rave, Ronald H. Janis, Frank E. Lawatsch, Jr., David Swerdloff, Lane Watson, Veronica M. Gonzalez and Edward Bion Piepmeier.  Excerpt above from a newsletter mailing from PPMLogix, used by permission from Mr. Stapleton at PPM Logix.


Crowd funding for creative projects

There are some interesting items articles that are coming to my attention.  This one, from a client (Frank Neukomm) has a flavor for start-ups:

Startups Look to the Crowd (Yahoo! Finance)
By JENNA WORTHAM | New York Times – Mon, Apr 30, 2012 12:25 PM EDT

But here is one that I really think is interesting – project funding for creative projects.  Take a look at Kick Starter.  My sister, Jenni Rebecca Stephenson who is the Managing Director of the newly merged Fresh Arts and SpaceTaker organization, says that:

[The site] works best when it involves a product or takeaway.  The biggest challenge of Kickstarter versus some of the others it that you don’t get ANY of the money unless you can raise ALL of your goal.  That serves as motivation for some, but a barrier for others.

Space Taker has been hosting workshops with other crowd funding entities for two years!  Like Indiegogo.  Two years, my sister is way ahead of her time, and obviously more hip and happening then me (just doing SEC related work outs and helping our clients get funding by transaction structuring) – that was a little tongue and cheek, but really, Space Taker is way ahead of other arts organizations…

And then OTC Markets kicks in with their own information hub at http://otcmarkets.web11.hubspot.com/jobs-act.


© 2012 by Rhodes Holdings LLC, except where noted and credited.

 
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Posted by on May 2, 2012 in BLOG, Business, Entrepenuers

 

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The JOBS Act

"Dr. Coburn and Senator Obama look over t...

"Dr. Coburn and President Obama look over the Federal Funding Accountability and Transparency Act" (Photo credit: Wikipedia)

Summary

The Fulbright & Jaworski law Firm put out an excellent newsletter article “The JOBS Act and its Effect” by Gregg J. Berman and Donal Ainscow (linked here by permission).  This article really does a good job (no pun intended) in summarizing the bill, soon to be signed by Obama who promised to sign the bill into law on Thursday.

Intended consequences

One of the interesting consequences is that the bill requires that the individual soliciting to sell their securities “…must use broker or funding portal“.  So, in looking at the funding portals that would be out there right now, I have found:

  • PPM Logix – an example of a merchant website that sells access to its bookshelf of legal documents, but also allows individuals and companies who are members (paid to access the library) can list their PPM for other accredited investors.  Good idea, well their products are good but being a funding portal is a stretch – not enough qualified investors to make it worth your while.
  • Merger Network (website, LinkedIn Group) – this is a website and associated LinkedIn group that provides a great place to list businesses for sale, so solicitations are not a stretch.  With over 1,400 active members, the discussions and the businesses listed are a great source of deal flow.

And then there are the full time funding portals and portals to resell restricted securities in private sales:

Earlier in the year, these came up in a search for shares in the Facebook before they announced their upcoming IPO.  There had been a robust market for the Facebook shares due to their huge run-up in value.

 
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Posted by on April 3, 2012 in BLOG, Public markets

 

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