Securities Litigation, Investigations and Enforcement

capital formation

Investing in the Next “Big Thing” Just Got Easier – SEC Promulgates New Crowdfunding Rules

Editorial BoardPosted on November 3, 2015

On October 30, 2015, the United States Securities and Exchange Commission (“SEC”) moved forward in implementing Title III of the JOBS Act and adopted new rules permitting companies to offer and sell securities to all potential investors through crowdfunding. Crowdfunding is the use of small amounts of capital from a large number of investors to finance new business ventures. This method of investment, typically conducted over the internet, is aimed at assisting smaller companies with capital formation by accessing a greater pool of potential investors. The SEC had previously opened crowdfunding investment to “accredited investors” (investors meeting certain net worth and/or investment experience criteria) but these rules permit non-accredited investors, i.e., everyone else, to participate while providing them with additional protection under the federal securities laws. Title III and these rules come in response to the enormous growth of equity crowdfunding through financing platforms such as GoFundMe, Kickstarter or Indiegogo.

Tweet, Tweet: The SEC Gets Social

Editorial BoardPosted on November 18, 2014

The SEC recently issued an investor alert to warn investors about potential fraudulent investment schemes involving popular social media sites such as Facebook, YouTube and Twitter, turning its eye towards investor fraud perpetuated via social media. The alert, issued by the SEC’s Office of Investor Education and Advocacy, provides five tips to help consumers recognize and avoid investment fraud, easily made anonymous online, using social media websites and services: (1) be wary of unsolicited offers to invest; (2) look for “red flags,” e.g., offers that sound too good to be true or that “guarantee” returns; (3) look for “affinity frauds,” which are “investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly or professional groups;” (4) be thoughtful about privacy and security settings; and (5) ask questions and investigate investment opportunities thoroughly. The alert also describes common investment scams that have used social media and the internet to gain traction, including “Pump-and-dump” schemes, fraudulent “research opinions” or “investment newsletters,” high-yield investment programs, and offerings that just fail to comply with applicable registration provisions of the federal securities laws.