On September 23, 2013, over 80 years of securities law was turned on its head when it became possible to publicly advertise unregistered securities offerings. This means that entrepreneurs and funds will now be able to find investors by running ads, using social media, webcasts, television, radio, billboards and other methods of reaching the general public.
The universe of potential investors has increased enormously, and this promises to shift the balance of negotiating power towards entrepreneurs and fundraisers.
The most important thing to understand is that even if your offering is advertised to the general public, you may only accept investment from "accredited investors." And you will have to do due diligence to make sure that an investor is, in fact, accredited. There are no exceptions to this rule.
For natural persons, an "accredited investor" is a person (1) whose individual net worth, or joint net worth with that person’s spouse, exceeds $1 million, excluding the value of the person’s primary residence; or (2) who had an individual income in excess of $200,000 in each of the two most recent years, or joint income with that person’s spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year. There are other tests for accredited investor status for entities.
The next most important thing to understand is that general solicitation offerings are subject to antifraud rules under the securities laws. This means that your offering and general solicitation documents must not contain any material misstatements or omit to state any material facts.
There are many other rules and other details you'll need to think about. This is tricky stuff, and it's easy to get into trouble if you are not careful about what you say or write. That's why you need a lawyer before you start raising funds.
The Law Offices of Andrew A. Hecht is one of the few practices that has experience in this space. One of our clients, PeoplesVC, Inc., was the first company ever to launch a general solicitation offering. We can guide you through the steps of planning your offering, preparing the offering documents and marketing your deal to accredited investors.
For a limited time we are prepared to provide these services on a fixed price basis. We work with hosting platforms, accountants, public relations specialists and other providers who can help you design and market your offering for a fraction of what you might pay a third party placement agent.
Contact us to schedule a call today. We'll discuss your business and figure out how we can help you.