1. The SEC Relents (somewhat)
Recent Developments in exempt issues and crowdfunding

2. In the Beginning “The Big Crash”
In the 20’s the Dow Jones Industrial Average rose sixfold, touching
Starting 1929 Dow Jones Industrial Average lost 89% of its value before finally bottoming out in July 1932.
Blamed primarily on wide-spread public speculation and margin buying fueled by promotion of questionable stocks by unscrupulous issuers and advisors.
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4. Securities Issue and Trading Regulation (In the beginning)
Securities Act of 1933
Required registration of issues with the FTC, some exemptions for small issues
Securities Exchange Act of 1934
Required the registration of stock exchanges (secondary traders), created SEC, approve stock exchange rules, regulate proxy practices and increased disclosure requirements
1938 Maloney Act
Formation of a national association of brokers and dealers that would create and enforce disciplinary rules and promote just and equitable principles of trade. (FINRA)
1940 Investment Company Act
Requires investment companies and advisors to register with the SEC
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5. Securities Law, Regulation and Enforcement Structure
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6. SEC Investor Protection
355 pages of investor protection
“The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” - SEC
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7. Primary Exemptions Prior to 2007
SEC Registration and periodic reporting of public issues required.
Exemptions from registration and reporting SEC Regulation D Rules 504, 505, 506
Require notification to SEC using Form D within 15 days, mostly accredited investors, with prior relationship, no mass solicitation, no “bad actors”
Rule 504, “Seed Capital Exemption”, offer and sell up to $1,000,000 of their securities in any 12-month period, no investment companies, subject to state regulation, general solicitation if allowed by state of registration.
Rule 505, offer and sell up to $5 million in 12-month period, unlimited “accredited” and 35 other investors, “restricted” securities, no investment companies, no general solicitation, issuer determines information release
Rule 506, all issuers, no dollar cap, no general solicitation, 35 max unaccredited investors, must be “sophisticated”, restricted securities
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8. Primary Exemptions Prior to 2007 (cont.)
Regulation A – Small public offerings
Public offerings of securities that do not exceed $5 million in any 12-month period
No resale restrictions
Issuer must provide and file an offering document similar to prospectus
Simpler and unaudited financial statements
No reporting requirements until company reaches more than $10 million in assets and more than 500 shareholders
Choice of three formats to prepare the offering circular
Must be registered in each state offered
In 1980 Massachusetts deemed the offering of Apple Computer stock to be “too risky” and did not allow its citizens to participate in the offering.
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9. Old Registration Exemptions
Rule 504 (intrastate)
Rule 505
Rule 506
Reg A
Available to:
Non-reporting issuers
No investment companies or “bad actors”
All issuers except “bad actors”
Non-reporting issuer; no investment companies or “bad actors”
Dollar cap:
$1 million aggregate in 12 months
$5 million aggregate in 12 months
None
Less than $5 million
Restrictions on general advertising
Allowed under some state registrations
Yes No
Restrictions on resale
May sell after registration or with Rule 144 compliance
Non-accredited investors
No limit
Up to 35, need not be “sophisticated”
35 maximum, must be “sophisticated”
Public offering
Prospectus required
State requirements
No; information must not violate anti-fraud provisions
Form 1-A filed with SEC; preliminary offering circular
Audited financials
Certified by independent CPA
Self-filing of limited information on Form 1-A
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10. Copyright Vinson & Vinson, 2016
Some recent shocks
Lehman Brothers bankruptcy
Perceived investor protection crises
Enron collapse – Sarbanes/Oxley
Mortgage securitization bubble – Dodd/Frank
Bernie Madoff Ponzi scheme
Stanford Financial Group fraud
Financial Crisis
Public perceptions of cronyism, derivatives manipulation, insider trading, etc.
Too big to fail; the 1% vs. the 99%
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11. Jump-start Our Business Startups Bill (JOBS) Signed April, 2012
Intended to make it easier for emerging businesses to access capital and thus increase employment
Titles:
TITLE I - REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES (Reduced disclosure for emerging growth companies)
TITLE II - ACCESS TO CAPITAL FOR JOB CREATORS (Removed mass solicitation ban in Rule 506 for issues sold to accredited investors only)
TITLE III – CROWDFUNDING (Crowdfunding)
TITLE IV - SMALL COMPANY CAPITAL FORMATION (Modify Reg A)
TITLE V - PRIVATE COMPANY FLEXIBILITY AND GROWTH (Changes to registration/de-registration requirements)
TITLE VI - CAPITAL EXPANSION (Raised registration requirement to 2,000 shareholders
TITLE VII - OUTREACH ON CHANGES TO THE LAW OR COMMISSION (Public comment and notification)
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12. Copyright Vinson & Vinson, 2016
Reg D, Rule 506(b); July, 2013
The company cannot use general solicitation or advertising to market the securities;
The company may sell its securities to an unlimited number of "accredited investors" and up to 35 other “sophisticated” purchases
Companies must give non-accredited investors disclosure documents that are generally the same as those used in registered offerings
Company must be available to answer questions by prospective purchasers
Financial statements need to be certified by an independent public accountant
Securities are restricted as to resale (cannot be resold for up to a year)
No limit on offering size
SEC, “Rule 506 of Regulation D”,
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13. Copyright Vinson & Vinson, 2016
Reg D, Rule 506(c); July, 2013
Can broadly solicit and generally advertise the offering
Unlimited accredited investors, no unaccredited
Issuer must take reasonable steps to verify that its investors are accredited 
Reviewing documentation, such as W-2s, tax returns, bank and brokerage statements, credit reports and the like.
Securities are restricted as to resale (cannot be resold for up to a year)
No limit on offering size
Must file SEC notice of issue, Form D
SEC, “Rule 506 of Regulation D”,
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14. Modified Reg A (A+ or mini-IPO)
Provides exemptions allowing some companies to use mass solicitation to offer and sell their public securities without having to register, “test the waters” provision
Must provide buyers of the issue with an offering document whose content is similar to the prospectus
Simpler financial statements that do not have to be audited
No Exchange Act reporting requirements until the company has more than $10 million in assets  and more than 500 shareholders
Choice of three formats to prepare the offering circular.
Tier 1 offerings of securities of up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer, all subject to state regulation
Tier 2 offerings of securities of up to $50 million in a 12-month period, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer; states’ regulations pre-empted
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15. Copyright Vinson & Vinson, 2016
Qualifications for A+
Disqualifications:
Are already SEC reporting companies and certain investment companies.
Have no specific business plan or purpose or have indicated their business plan is to engage in a merger or acquisition with an unidentified company.
Are seeking to offer and sell asset-backed securities or fractional undivided interests in oil, gas or other mineral rights.
Have been subject to any order of the Commission under Exchange Act Section 12(j) entered within the past five years (“bad actor”).
Have not filed ongoing reports required by the rules during the preceding two years.
Are disqualified under the “bad actor” disqualification rules.
AdditionalTier 2 requirements:
Engages services from a transfer agent registered with the Commission.
Reporting requirements: scaled back versions of Form 10-K, Form 10-Q and Form 8-K
Is current in its annual and semiannual reporting at fiscal year-end.
Has a public float of less than $75 million as of the last business day of its most recently completed semiannual period, or, in the absence of a public float, had annual revenues of less than $50 million as of its most recently completed fiscal year. 
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16. ELIO Motors (First Under Reg A+ tier 2)
Issued 2,090,000 $12/share under Reg A+ Nov. 2015
Offered direct to public on crowd- funding site StartEngine.com
Campaign closed Feb. 2016
5,000 investors
$17 million in proceeds
Registered for trading on OTCQX
On 8/19 closed $19.50, 30-day avg. Volume 4,127
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17. Active Reg A+ Tier 2 Offering
POMM $10M Regulation A Plus Tier 2 issue, offering on Crowdfondue.
Offering 802,065 shares, 35.7% of the company (22.4% of the company on a fully diluted basis). Shares are being offered in units, at $498, each unit 40 shares at $ per share.
Goal: 802,065 Shares (35.7% of the company)
Currently 98 investors, $796, committed.
SEC notice of qualification May 24, 2016
Offering details on Crowdfondue
Not exchange registered
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18. Copyright Vinson & Vinson, 2016
SEC Reg CF
Aggregate amount sold to “all investors”, may not exceed $1 M in any 12-month period.
Individual investment limits in any12-month period:
Investor annual income or net worth less than $100,000, the investor is limited to the greater of $2,000 or 5% of the lesser of his or her annual income or net worth.
Investor annual income and net worth both greater than $100,000, limited to 10% of the lesser of annual income or net worth, to a maximum of $100,000.
During the 12-month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000
Transaction must be made through a broker, or through a registered “funding portal”
Disclosure through filing electronic Form C on EDGAR, made public prior to the start of the offering
Issuer required to provide financial statements covering the two most recently completed fiscal years or since inception
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19. Restrictions on Issuers under CF
No non-U.S. companies
Companies that are disqualified under Regulation Crowdfunding disqualification rules (modeled on, and substantially similar to, the Rule 506(d) “bad actor” rules under Regulation D)
No investment companies or private funds
No companies that are reporting companies under the Securities Exchange Act of 1934, as amended
No companies that are delinquent in filing the ongoing reports required by Regulation Crowdfunding
No companies that have no specific business plan or have indicated that their business plan is to engage in a merger or acquisition with an unidentified company or companies
May only use one intermediary for an issue 
Cap of $1 million in any trailing 12 months
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20. Requirements of CF Portals
Portals must register with SEC (Form “Funding Portal”) and join FINRA
Periodic FINRA compliance examinations
Prohibited acts
Offering investment advice or making recommendations
Soliciting purchases, sales or offers to buy securities offered or displayed on their platforms;
Compensating promoters and other persons for solicitations or based on the sale of securities
Holding, possessing, or handling investor funds or securities
Portals must:
Abide by a list of disclosure and fraud-prevention requirements
Conduct basic diligence regarding issuers
Comply with FINRA regulations for portals
Costs of startup estimated from $50K to $250K
Must report specific events within 30 days and must report gross revenue annually
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21. Several Types of Crowdfunding
Donation-based crowdfunding – GoFundMe, HelpersUnite, Crowdrise
the crowd gives money or some other resource because they want to support the cause; receives nothing in return
Reward-based crowdfunding - Fundable, KickStarter, Indiegogo
the crowd gives money to a business in exchange for a “reward,” typically the product or service that that particular company produces
Equity-based crowdfunding – CircleUp, MicroVentures, StartEngine, Crowdfondue
the company sells some or all of its shares to the members of the crowd
Debt crowdfunding – SoMoLend, Kiva, FundingCircle
the company borrows money from the crowd under a loan contract
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22. Copyright Vinson & Vinson, 2016
506b
506c
Reg A+ Tier 1
Reg A+ Tier 2
Reg CF
Available now
Yes
Max to raise
No cap
<$20M
$20-50M
$1M
Crowdfunding No
Unaccredited investors
Up to 35
No sales to unaccredited investors
Up to 10% of annual income or net worth
Registration
Form D
Full registration
Form 1-A
Form C
State Registration
Depends on state
Coordinated state review
SEC Review
Several weeks
Several Weeks
21 days
Annual Audit/Financial Reports
Certified by the principal executive
Estimated Cost
$25-75K
$25-50K
$50-75K
$75-150K
$5-25K
Investor accreditation
Self
Issuer verified
Suitable for
Seed, scale, growth
Growth
Seed, scale
Source: Crowdfund Intermediary Regulatory Advocates
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24. Copyright Vinson & Vinson, 2016
FINRA Licenses
Series 7 General Securities Representative Examination
corporate stocks and bonds
rights
warrants
real estate investment trusts (REITs)
collateralized mortgage obligations (CMOs)
municipal securities
options-equity, index, and foreign currency
investment company products/variable contracts
direct participation programs
exchange traded funds (ETFs)
Series 62 Corporate Securities Limited Representative Examination
REITs
Series 79 Investment Banking Examination
Debt and equity offerings (private placement or public offering)
Mergers and acquisitions
Tender offers
Financial restructurings
Asset sales
Divestitures or other corporate reorganizations
Business combination transactions
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25. Copyright Vinson & Vinson, 2016
Thank you
Securities offered through Independent Investment Bankers Corp. a broker-dealer, Member FINRA/SIPC. Vinson & Vinson, LLC, is not affiliated with Independent Investment Bankers Corp.  To check the credentials and background of your investment advisor, go to FINRA Brokercheck.  This presentation is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. 
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