The S.E.C. has finally lifted the ban on General Solicitation for private raising of funds, which presumably will assist entrepreneurs find investors for startup or expansion funding. The new regulation will not go into effect until 60 days after it is first published in the Federal Register. Although general solicitation for investors is going to be permitted, an issuer/promoter must take reasonable steps to make sure that the investor is “accredited” prior to the investment.
Initially, I think this new change in the law will prove to be rough-going, as there will be opportunities for scam artists to take money from unsuspecting investors. Plus, statistics show that any investment in startups is usually an opportunity to lose money. It will be very important for every would-be investor to do their due diligence, prepare to lose money, and diversify their risk.
However, it does represent a democratization of the fundraising process to enable honest entrepreneurs to meet new investors and raise capital which up to now they have not been unable to do. The hedge funds, private equity funds, and venture capital funds can also use the new law, but they may not have the same needs as the entrepreneur.
The heralded Connecticut legislation that would have created a “pay for performance” regime for social innovation investment and funding preventive social programs with money invested by private investors has died. It never reached the floor of either chamber of the Connecticut legislature during the term ended June 5, 2013.
The proposed law, Senate Bill 854, would have vaulted Connecticut into a handful of States which authorize the delivery of preventive social programs by nonprofit service providers using funds invested by private investors. Returns on investment would have been conditioned on the achievement of specific, quantifiable outcomes based on defined benchmarks. The proposed law, which was voted out of both the Human Services and Appropriations Committees, was never voted upon by the Senate, and therefore did not come up for vote in the House.
General solicitation and general advertising for Rule 506 private securities offerings—mandated by Title II of the JOBS Act and suppposed to have been in effect as of last July—is facing further delays, which shouldn’t surprise anyone. Included in the testimony today of SEC Commissioner Elisse B. Walter before the House Subcommittee on Oversight and Investigations, Committee on Financial Services, regarding implementation of Title II, were thoughts regarding possibly making ‘accredited investor’ status more stingent (which I have blogged about previously) as well as not making any promises regarding when final rules will be issued by the SEC. In her written statement, she acknowledged that Title II rulemaking was required to be completed within 90 days of the JOBS Act’s enactment and noted that public comment on the proposed rule was sharply divided:
Sixty-one commenters, including the majority of professional and trade associations/organizations, law firms and legal associations that submitted letters, expressed general support for the proposal, with many stating generally that the elimination of the prohibition on general solicitation or general advertising would facilitate capital formation. In addition, several supporters recommended that the proposed framework for verifying accredited investor status be supplemented in the final rule by including a non-exclusive list of specific verification methods that could be relied upon by issuers seeking greater certainty that they are satisfying the verification requirement. Eighty-one commenters expressed general opposition to the Commission’s proposal, including the Investor Advisory Committee formed by the Commission as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, all of the investor organizations, and all but one of the federal and state officials who submitted letters. Some of these commenters stated that the proposed rules, if adopted, would result in an increase in fraudulent securities offerings, with a number recommending that the Commission consider additional safeguards, such as those recommended in certain pre-proposing release comment letters. Currently, staff in the Divisions of Corporation Finance and Risk, Strategy, and Financial Innovation are developing recommendations for the Commission’s consideration as to how best to move forward with implementation of Title II.
She concluded by stating that it is a priority for the SEC to finalize Title II rules.
We all know the phrase “Big Data.” But when I received a tweet yesterday advising that I could buy a 3 terrabyte external hard drive for approximately $99, it just cemented what has come to be an obvious realization: computer storage is cheap. So, thanks to Jonah Lupton, I saw that the pricing of storage over the past 30 years shows an amazing price cliff, as follows:
Price of 1 GB of storage over past 30 years:
1981–$300,00 1987–$50,000; 1990-$10,000; 1994-$1,000; 1997–$100; 2000-$10; 2004- $1; and 2012- $0.10
I attended the second of the four part program on Energy and Environmental Innovations sponsored by the Connecticut Chapter of the Green Building Council (“CTGBC”). The program was held in New Canaan High School and featured a keynote address by … Continue reading