Much of what practitioners know about private placements is obsolete.
Every lawyer engaged in capital-raising must have current expertise in private placements and Regulation D, and understand the expanded liability risks at the federal and state and regulatory levels. SEC enforcement and FINRA oversight efforts reveal an increased number of prosecutions and enforcement actions involving private placements
Most capital in the U.S. is raised by private placements, by entities ranging from small start-ups to the largest international public companies, angel investors, venture capital firms, investment funds, and real estate vehicles. Much of what lawyers have understood about private placements was upended in 2012 by the JOBS Act (Jumpstart Our Business Startups), which many have called the most radical amendment to federal securities regulation since the Securities Exchange Act of 1934. The Securities and Exchange Commission has adopted rules, pursuant to the JOBS Act, to permit general solicitation and public advertising in private offerings limited to accredited investors and it has accommodated crowdfunding for small investments entirely outside the accredited investor regime. Further, the JOBS Act has provided a new exemption, called ‘Regulation A+,” for offerings up to $50 million.
Of extraordinary significance, also, is the JOBS Act provision that raises the threshold for mandatory registration under Section 12(g) of the Securities Exchange Act of 1934 from 500 to 2,000 shareholders of record, thereby creating an entirely new creature …the very large private company funded through the use of public advertising.
Our panelists will analyze the SEC’s rulemaking and will discuss how market practice is responding to the rulemaking, including discussion of the following considerations:
How will the new Rule 506(c), permitting general solicitation in some Reg D offerings, be used in practice? How will issuers seek to verify whether investors are accredited?
Is Rule 506(c) the “real” crowdfunding exemption for “accredited crowdfunding”?
Will general solicitation mean that a greatly increased pool of companies will become private placement issuers?
Who will use crowdfunding and will it really work?
What are the liability risks to issuers and counsel in offerings conducted by general advertising?
How are the states responding to the new federal rules?
In this highly successful and comprehensive course, being offered for the 32nd time in 2014, our panel of experienced practitioners and regulators presents a review of current federal and state laws and regulations relevant to private placements, and provides practical advice for handling private placements.
What You Will Learn
The course provides more than 13 hours of instruction in current and developing issues in private placements as a framework for a practical discussion of how private placements will work in the new regulatory environment.
Our panel will also address:
the fundamentals of private placements and alternatives to private placements
ways to avoid the most common mistakes and sources of liability of both issuers and lawyers in the conduct of offerings
fixing a broken offering, and what to do when an offering cannot be fixed
dealing with difficult disclosure issues
the lawyer’s due diligence obligations and risks of liability
special issues applicable to private investment funds
private placements in mergers and acquisitions
expanding state regulatory and enforcement efforts, and NASAA coordination
expanding FINRA regulation
exit strategies and resales of restricted and control securities
special issues for employee compensation plans.
The expert faculty includes current and former SEC and state regulators; private practitioners; and Professor J. Williams Hicks, the author of the leading treatise on private placements and restricted securities. They offer an overview, a sense of perspective, and an understanding of the developments and concerns of those undertaking private placement offerings. Substantial time is reserved for the panel to respond to written questions submitted by the registrants.
Who Should Attend
This accredited continuing legal education program from ALI CLE is designed for lawyers whose clients will be raising capital in the new regulatory environment, experienced securities practitioners who want to hear discussions of current practice and regulation in private placements; law firm associates who want to obtain a firm grounding in the laws and regulations applicable to private placements; in-house counsel for companies and their principals planning to raise capital; compliance officers an in-house counsel of financial firms that engage in private placements; anyone engaged in an effort to raise capital for new, start-up, development stage businesses including entrepreneurs, angel financiers/investors, venture capitalists, business finders, bankers; and anyone determined to create more jobs in the U.S.
Alan J. Berkeley, K&L Gates LLP, Washington, D.C., London, and Sao Paulo (also on faculty)
Robert B. Robbins, Pillsbury Winthrop Shaw Pittman LLP, Washington, D.C.; Adjunct Professor of Securities Law, University of Maryland Law School (also on faculty)
Hon. Denise Voigt Crawford,Securities Consultant, Austin Texas; former
Commissioner, Texas State Securities Board; and former President, North American Securities Administrators Association
Martin P. Dunn, Morrison & Foerster LLP, Washington, D.C.; former Deputy Director, Division of Corporation Finance, U.S. Securities and Exchange Commission
Sebastian Gomez,Chief, Office of Small Business Policy, Division of Corporation Finance, U.S. Securities and Exchange Commission, Washington, D.C.
J. William Hicks, C. Ben Dutton Professor Emeritus of Law, Maurer School of Law, Indiana University-Bloomington
Stephen J. Korotash, K&L Gates LLP, Dallas; former Associate Director, Division of Enforcement, U.S. Securities and Exchange Commission
8:55 a.m. Welcome and Announcements – ALI CLE Staff
Webcast Segment A – The Private Placement Exemption and Private Investment Funds
9:00 a.m. Introductory Remarks and Background — Mr. Berkeley
9:10 a.m. Conditions and Mechanics of the Private Placement Exemptions: The Existing Rules and the SEC's Proposed Changes — Messrs. Dunn, Martin, and Robbins
Summary of the registration exemptions, the changes made by the JOBS Act and amendments to Reg D; general solicitation and public advertising in Reg D offerings; CD&I guidance from te SEC staff; advantages and disadvantages of the available exemptions; the relationship with state securities laws; key concepts and requirements; disclosure and delivery of offering materials; the "innocent and immaterial" defense; integration and aggregation issues and Rule 155; private offerings by public companies
10:00 a.m. Networking and Refreshment Break
10:15 a.m. Identifying and Soliciting Investors in a World of General Solicitation and Public Advertising and Crowdfunding; Broker-Dealers, Intermediaries, Portals, and Finders — Messrs. Berkeley, Dunn, and Robbins and Ms. Tierney
General solicitation and advertising under the JOBS Act, and limitations on general solicitation and advertising in offerings not covered by the JOBS Act; agents, finders, and broker-dealers; pre-existing relationships and the “immaculate offeree”; the law firm as “finder”; dealing with confidentiality commitments and information disparities (“big boy letters”); coordination of Reg D and Reg S offerings; activities of offshore offerors; Rule 144A offerings.
11:00 a.m. SEC Regulatory Perspectives and Initiatives; Reg A+ and Crowdfunding — Messrs. Berkeley, Dunn, Martin, and Robbins and Ms. Tierney
Further explanation and discussion of the SEC's Regulation D revisions, proposals, and issues; Section 12(g) and the emergence of the very large private company; Regs A and A+ and crowdfunding.
11:45 a.m. Questions and Answers
12:00 noon Lunch Break
Webcast Segment B – Preparing Offering Materials: Blue Sky Practice
1:30 p.m. FINRA Regulatory Perspectives; The New PPM Filing Requirements — Messrs. Price and Souza
FINRA’s new filing requirements for private placements, and FINRA positions on broker-dealers’ due diligence and other obligations; FINRA registration and regulation requirements for crowdfunding intermediaries and portals; expanded liability risks for broker-dealers and crowdfunding portals and intermediaries
2:30 p.m. Networking and Refreshment Break
2:45 p.m. Blue Sky Practice — Professor Crawford and Mr. Makens
How to identify and solve blue sky issues relating to a private offering; how the states are responding to general solicitation and public advertising in offerings under Rule 506 (c) and crowdfunding initiatives; when state and federal broker-dealer registration is required; the most common sources of exposure to enforcement actions or civil liability and how to avoid them; joint or parallel enforcement initiatives by the states; the role of NASAA; the efforts by some states to "re-regulate" private placements; the use of finders and other "consultants"
4:00 p.m. Questions and Answers
4:30 p.m. Adjournment for the Day; Networking Reception for Registrants and Faculty
Friday, March 14, 2014
8:30 a.m. Networking Session and Continental Breakfast
Webcast Segment C – Liability and Ethical Issues in Private Placements
9:00 a.m. Federal and State Enforcement Programs and Developments — Professor Crawford and Messrs. Korotash and Makens
Recent developments in federal and state enforcement actions relating to private offerings
9:45 a.m. Civil Liability and the Concept of Materiality; Recent Developments — Messrs. Berkeley and Martin and Professor Hicks
The most common sources of liability of issuers, underwriters, sponsors, promoters, lawyers, accountants, and finders; attorney liability; developments in aiding and abetting and the “bespeaks caution” doctrine; case law developments in the concept of materiality
10:30 a.m. Networking and Refreshment Break
10:45 a.m. Ethical and Legal Responsibilities of Counsel; Due Diligence — Messrs. Makens, Martin, and Robbins
Defining the due diligence obligations of counsel: How much due diligence is enough? Is due diligence different for publicly advertised private placements or for crowdfunding offerings? Ethical issues relating to conduct of offerings and disclosure of client misconduct.
11:45 a.m. Questions and Answers
12:00 noon Lunch Break
Webcast Segment D – Resales of Restricted Securities, Contingency Offerings, Offerings to Employees, Rescission Offers, and Special Topics
1:30 p.m. Avoiding Liability in Closings of Contingency Offerings — Mr. Robbins
Most private offerings and crowdfunding offerings are contingency (all-or-none or part-or-none) offerings. Substantial liability risks lurk behind those contingencies. Rules 10b-9 and 15c2-4; purchases and loans by the issuer or underwriter to meet the contingency; recent case law, SEC interpretations, and FINRA enforcement; special disclosure and structuring issues; how to structure contingency offerings to lessen the risk of liability
2:00 p.m. Resales of Restricted Securities: Rule 144, Section 4(1-1/2), and Rule 144A; PIPE Transactions — Messrs. Berkeley, Dunn, and Robbins and Professor Hicks
Resales and transfers of restricted securities under Rule 144 and Rule 144A; interpretation of “Section 4(1-1/2)”; resales by affiliates; removal of legends on restricted stock; corporate desk-drawer exchanges and matching services; conduit transactions ("gypsy swaps"); the future of PIPE transactions and other developing structures
2:45 p.m. Networking and Refreshment Break
3:00 p.m. Private Offerings by Serial Syndicators and Private Investment Funds — Ms. Mann and Mr. Souza
Special issues relating to hedge funds and other private investment funds; use of general solicitation and public advertising in private investment funds; exemptions from the Investment Company Act of 1940 and the consequences of lack of an exemption
3:45 p.m. Special Topics: Offers to Employees under Rule 701; Use of Private Offerings in Mergers and Acquisitions — Mr. Robbins
Offerings to employees under Rule 701; use of Rule 701 for stock option, stock bonus, employee stock purchase, and other types of employee benefit plans; the effect of general solicitation on the use of private offerings in mergers and acquisitions
4:30 p.m. Questions and Answers
4:45 p.m. Adjournment for the Day
Saturday, March 15, 2014
8:15 a.m. Networking Session and Continental Breakfast
8:45 a.m. Potpourri: Regulation D in Practice; Questions and Answers * — Professor Hicks; Messrs. Berkeley, Dunn, Makens, Martin, Price, Robbins, and Souza and Mss. Crawford and Mann
(Based on the interests of the registrants) Topics may include: Internet trading platforms for restricted securities; rescission offers; installment payments in private offerings; special problems of the large private company; inadvertent public companies; hedge fund private placements; special problems of private "bridge financings"; offshore offerings and the relationship to Regulation S; domestic offerings by offshore issuers; participation by issuer's counsel in the selling process; "Plain English" in private placements; disclosure in offerings made only to accredited investors; use of projections and clients; responses to fact patterns and questions from registrants
11:00 a.m. Adjournment
* This segment not webcast or recorded
Total 60-minute hours of instruction: 13.5, including one hour of ethics
Suggested Prerequisite: Some experience in legal practice in subject matter
Educational Objective: Maintenance of professional competence as a practitioner; provision of information on recent legal developments; development of proficiency in performance of intricate and complex legal tasks within a narrow area