1. The JOBS Act of 2012
Weintraub Law Group PC

2. The JOBS Act of 2012 Weintraub Law Group PC
Boutique law firm specializing in corporate and securities law.
Mergers and acquisitions in the lower middle market and middle market
Public and private offerings

3. The JOBS Act of 2012 Title II Regulation D
General solicitation and advertising
Platforms
Title III
Crowdfunding of securities
Effective May 16, 2016
Title IV
Regulation A+
Small public offerings up to $50 million
Modernization of securities offering to use the Internet
Slower than anticipated usage to date
Investor confidence
Akin to acceptance of Internet commerce

4. Regulation Crowdfunding
Raise $1.0 million in a 12-month period
Simultaneous Regulation D offerings permitted with qualifications concurrent with Section 506(b) offerings
Concurrent with Section 506(c) offerings
Investors in 12-month period
Less than $100,000 of net worth or income (greater of $2,000 or 5% of the lesser)
$100,000 or more of both net worth or income (10% of the lesser, not to exceed an investment of $100,000)
Lesser of net worth or income computed under Regulation D guidelines
Self accreditation by investors to the intermediary and issuer when register, subscribe and close

5. Regulation Crowdfunding
Transaction must be conducted through an intermediary who is either a broker/dealer or funding portal that complies with Section 4(A)(a)
Issuer complies with Section 4(A)(b)

6. Regulation Crowdfunding
Section 4(A)(a)
Funding portal definition
Educate investors: upon opening account; video or Q&A on risks, illiquidity, resale restrictions & cancellation
Upon sign-up on platform, intermediary and promoters’ fees must be disclosed
Fraud (bad actor) check by intermediary (intermediary liability)

7. Regulation Crowdfunding
File with SEC and provide to investors: 21-day cooling off period but may receive money, but not close
Minimum (target)/Maximum offerings permitted
Green-shoes permitted/Oversubscription
Compliance with investor limitation rules
Privacy rights protection
Prohibition on payment for leads – can pay flat fee for leads to intermediary’s platforms, however, no identifiable information
No financial interest rule – except transaction based fees, same as investor
No fidelity bond required

8. Regulation Crowdfunding
Funding Portal Safe Harbor Activities
Limited Offerings
Highlighting Issuers and Offerings
Search Functions (may be ed)
All communications must be online (no seminar or meetings offline)
Issuer must have a website
May generally advertise existence of intermediary through multiple medias

9. Regulation Crowdfunding
Communications Channels (blog)
Required
Funding portal cannot participate
Advising Issuers
Advice on Form C
Structure and content permitted
Compensation Arrangements
Contract with BD in either direction for payment of fees for sale of services
Must be in written agreement
Advertising (Telemarketers) (Reg. D also)
Advertise existence of funding portal
May identify broad spectrum of issuers
Objective only

10. Regulation Crowdfunding
Section 4(A)(b) for Issuers
Offering Memorandum on Form C
Advertising on Internet and social media: tombstone format
No blank check companies, SPVs, investment companies (including exemptions), SPVs or hedge funds
Compensation rules for promoters, officials, directors, etc. (disclosure) – must be through intermediary after offering is made on the blog
Annual filings (not audited) within 120 days of FYE may be on platform or website of issuer or to investors
Financial Statement Requirements

11. Regulation Crowdfunding
Types of offerings for Regulation Crowdfunding:
Emerging growth businesses
Specific real estate investments
Community restaurant expansion
Specific medical device or drug

12. Regulation Crowdfunding
Legal Fees
Form C: $5,000
Corporate Services: vary
Formation of entity: Up to $3,500
Voting trust: Up to $2,500
Accounting Fees (No PCAOB)
Audit: $2,500-$25,000
Review: $2,500-$10,000
Intermediary
Commissions: up to 10%
$500-$3,500 (BD v. FP)
Marketing-Videographer: $2,500-$10,000

13. Title II Traditional Syndication “Herding Cats” ecosystem
No general solicitation or advertising
Pre-existing relationships only (Citizen X No-action letter)
Rule 506(b)
Non-specified funds
Inefficiencies

14. Title II Internet meets offer and sale of securities
Use of social media and the Internet
Use of portals
General Solicitation and Advertising

15. Title II General solicitation and advertising
Accredited investors only
No self accreditation
Non-Exclusive safe harbors
Verify Investor, Inc.

16. Title II How does it work?
Teaser Ad in blast, LinkedIn, Facebook, etc.
Rule 134
Proposed Rule 509 page
Sold only to accredited investors
Securities offered pursuant to an exemption and not registered
SEC not passed on the merits
Restrictions on transfer
Substantial risk of loss
Tombstone on steroids
Section 4(c) Portal
Online ecosystem: SaaS provider

17. Title II Marketplace Portal Section 4(c) of the Securities Act of 1933
Applies to only Regulation D offerings and Rule 506
Exemption from registering as a broker dealer
Maintains a platform for the offer and sale of securities through general solicitation
May co-invest in securities.
May provide ancillary services (due diligence fees and document preparation fees)
May not:
Receive any compensation unless for ancillary services.
Cannot possess customer funds or securities
Not a bad actor

18. Title II Fees and the Marketplace Portal
No fees except ancillary services fees
Reasonableness of the ancillary fees and disguised placement fees
SPVs and carried interests
SPVs and management fees
Legal Fees: PPM: $20,000-$35,000

19. Title II Proprietary Portal Issuer exemption Transaction based fees
3a4-1 Associated persons non-exclusive safe harbor
No direct or indirect compensation rule
Sales broker rule-one offering in 12 month period
Administrative rule

20. The JOBS Act of 2012 Regulation A+ Tier 1 Tier 2
12 month period: up to $20.0 million
Selling affiliated shareholders: 30% up to $6.0 million
Non-affiliates: no limitation
Tier 2
12 month period: up to $50.0 million
Selling affiliated shareholders: 30% up to $15.0 million

21. The JOBS Act of 2012 Regulation A+
Tier 1: Raise $20 million in a transaction
Tier 2: Raise $50.0 million in a transaction
Public Registration
Financial Statements (non-PCAOB) Audit (Tier 2) v. Review (Tier 1)
Investment in a transaction
10% of the greater of income or net worth
Greater of net worth or income computed under Regulation D guidelines
Self accreditation by investors
No state blue sky (Tier 2); NAASA Blue Sky (Tier 1)
Publicly tradable (venture exchanges)
Real estate non-specified if have a business plan
Investment Company Act of 1940: Section 3(c)(5)(C) (Real Estate)
Investment Advisors Act of 1940

22. The JOBS Act of 2012
Weintraub Law Group PC Carroll Canyon Road Suite 230 San Diego, CA