Stubbs Alderton & Markiles' client VivoAquatics, the leading provider of innovative water management and real-time monitoring platform for hotels, resorts, fitness clubs, and other commercial facilities announced it has secured Series A financing led by Level Equity, a growth equity firm focused on software and automation companies. The funding represents another milestone for the company as leading brands and properties continue to adopt the VivoPoint software and IoT platform to proactively manage the risks and costs of water within a facility while improving the guest experience.
To read the full press release visit here.
Stubbs Alderton & Markiles’ attorneys representing VivoAquatics in this deal are John McIlvery, Kelly Laffey, and Brent Armitage.
For more information about our Venture Capital and Emerging Growth practice, contact John McIlvery at
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Stubbs Alderton & Markiles client BillGO, a B2B payment engine, has announced its acquisition of Prism, an award-winning app that has already paid $1B in bills on behalf of its customers. This will yield a considerable boost to BillGO’s real-time payments (RTP) biller network. BillGO will leverage Prism’s existing network of over 11,000 billers for its customers, widening their already significant lead in the bill payments industry – providing the most advanced eBills (statements) and bill presentment platform.
To read the full press release visit here.
Stubbs Alderton & Markiles’ attorneys acting as counsel BillGO in this deal were John McIlvery and Jonathan Friedman.
About
BillGO constantly creates and innovates past what exists. That drive powers the BillGO team to relentlessly advance payment systems to accelerate speed, efficiency, and security. BillGO provides a simple integration into any existing system that gives payment providers access to a faster, proven bill payments engine. Learn more: https://www.billgo.com/
For more information about the Mergers & Acquisitions practice, contact John McIlvery at [/vc_column_text][/vc_column][/vc_row]
Stubbs Alderton & Markiles client Malauzai, a provider of mobile and Internet banking solutions for community financial institutions, has been acquired by Finastra, a fintech company that builds and deploys next-generation technology on an open software architecture the company developed and a cloud system.
To read the full press release visit here.
Stubbs Alderton attorney John McIlvery has represented Malauzai since its inception through acquisition, demonstrating how SA&M creates and builds relationships with its clients throughout their evolutionary path. Other attorneys participating in the transaction included Caroline Cherkassky and Kelly Laffey.
About Malauzai Software
Malauzai was incorporated in 2010 in response to the growing demand for a technology company that could provide innovative mobile solutions for community financial organizations. As a cool company in a cool town with a focus primarily on community financial institutions, Malauzai provides consumer and business digital banking that enhance the customer experience for mobile and Internet banking, ultimately resulting in increased value for financial institutions.
For more information about the Mergers & Acquisitions practice, contact John McIlvery at or Kelly Laffey at .
Resonant Inc.(NASDAQ: RESN), a designer of filters for radio frequency, or RF, front-ends that specializes in delivering designs for difficult bands and complex requirements, today announced the closing of an underwritten public offering for 5,714,286 shares of its common stock at a per share price to the public of $3.50. The Company received net proceeds of approximately $18.4 million from the offering after deducting the underwriting discount and estimated offering expenses.
To read the full press release, click here.
Stubbs Alderton & Markiles’ attorneys that represented Resonant in the transaction were John McIlvery and Jonathan Friedman.
About Resonant® Inc.
Resonant is creating software tools and IP & licensable blocks that enable the development of innovative filter designs and modules for the RF front-end, or RFFE, for the mobile device industry. The RFFE is the circuitry in a mobile device responsible for the radio frequency signal processing and is located between the device’s antenna and its digital baseband. Filters are a critical component of the RFFE that selects the desired radio frequency signals and rejects unwanted signals and noise.
To learn more about our Public Securities Practice, contact John McIlvery at .
Stubbs Alderton & Markiles’ client Resonant, Inc. (NASDAQ: RESN) a designer of filters for radio frequency, or RF, front-ends that specializes in delivering designs for difficult bands and complex requirements, announced that it has entered into a definitive agreement with an affiliate of Longboard Capital Advisors, LLC, an existing stockholder of Resonant to raise gross proceeds of $7.5 million. Congratulations on this success!
To read the full press release click here.
Stubbs Alderton attorney representing Resonant in this transaction was John McIlvery.
About
Resonant is creating software tools and IP & licensable blocks that enable the development of innovative filter designs for the RF front-end, or RFFE, for the mobile device industry. The RFFE is the circuitry in a mobile device responsible for the radio frequency signal processing and is located between the device’s antenna and its digital baseband. Filters are a critical component of the RFFE that selects the desired radio frequency signals and rejects unwanted signals and noise. For more information, please visit www.resonant.com.
For more information about our Public Securities practice, contact John McIlvery at
[vc_row type="in_container" full_screen_row_position="middle" scene_position="center" text_color="dark" text_align="left" overlay_strength="0.3" shape_divider_position="bottom"][vc_column column_padding="no-extra-padding" column_padding_position="all" background_color_opacity="1" background_hover_color_opacity="1" column_shadow="none" column_border_radius="none" width="1/1" tablet_text_alignment="default" phone_text_alignment="default" column_border_width="none" column_border_style="solid"][vc_column_text]Stubbs Alderton & Markiles, LLP client THX announced this week that Razer™, the leading global lifestyle brand for gamers, has acquired the majority of the assets of THX Ltd. and brought onboard the management and employees of the company. THX will continue to operate as an independent entity under its own management and apart from the ongoing business of its parent company. Financial details of the transaction were not disclosed.
Stubbs Alderton & Markiles’ attorneys representing THX in the transaction include Scott Galer, John McIlvery, and Sean Greaney.
To read the full press release, click here.
About Stubbs Alderton & Markiles, LLP
Stubbs Alderton & Markiles, LLP (SAM) is a California business law firm with robust intellectual property, litigation, corporate, public securities, mergers and acquisitions, and entertainment practice groups. SAM focuses on the representation of emerging growth companies, middle market public companies, large technology companies, celebrities, and entertainment companies. SAM’s mission is to provide technically excellent legal services and outstanding results in a highly-responsive, service-oriented, and cost-effective manner. These principles are the hallmarks of our firm.
To learn more about our Mergers & Acquisitions practice, contact Scott Galer at or (818) 444-4513.
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Stubbs Alderton & Markiles, LLP announced that it reprsented its client Resonant Inc. (NASDAQ: RESN), a designer of filters for radio frequency, or RF, front-ends that specializes in delivering designs for difficult bands and complex requirements, in the closing of an underwritten public offering for 2,715,000 shares of its common stock, which includes the exercise in full by the underwriters of their over-allotment option, at a per share price to the public of $4.25. The Company will receive gross proceeds of approximately $11.5 million from the offering.
Stubbs Alderton & Markiles' attorneys that represented Resonant in the transaction were John McIlvery and Jonathan Friedman.
To read the full press release on Businesswire, click here.
About Resonant® Inc.
Resonant is creating innovative filter designs for the RF front-end, or RFFE, for the mobile device industry. The RFFE is the circuitry in a mobile device responsible for the radio frequency signal processing and is located between the device’s antenna and its digital baseband. Filters are a critical component of the RFFE that selects the desired radio frequency signals and rejects unwanted signals and noise.
About Resonant’s ISN® Technology
Resonant can create designs for hard bands and complex requirements that we believe have the potential to be manufactured for half the cost and developed in half the time of traditional approaches. The Company’s large suite of proprietary mathematical methods, software design tools and network synthesis techniques enable it to explore a much bigger set of possible solutions and quickly derive the better ones. These improved filters still use existing manufacturing methods (i.e. SAW) and can perform as well as those using higher cost methods (i.e. BAW). While most of the industry designs surface acoustic wave filters using a coupling-of-modes model, Resonant uses circuit models and physical models. Circuit models are computationally much faster, and physical models are highly accurate models based entirely on fundamental material properties and dimensions. Resonant’s method delivers excellent predictability, enabling achievement of the desired product performance in roughly half as many turns through the fab. In addition, because Resonant’s models are fundamental, integration with its foundry and fab customers is eased because its models speak the “fab language” of basic material properties and dimensions.
About Stubbs Alderton & Markiles, LLP
Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm.
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For more information about the Public Securities practice at Stubbs Alderton & Markiles, LLP contact John McIlvery at (818) 444-4500 or
Stubbs Alderton & Markiles, LLP announces that it represented client Vitesse Semiconductor Corporation (Nasdaq: VTSS) in its successful sale to Microsemi Corporation (Nasdaq: MSCC). Microsemi acquired Vitesse through a cash tender offer and follow-on merger at a price of $5.28 per share, for a total transaction value of approximately $389 million. SAM Attorneys John McIlvery, Jonathan Friedman and Daniel Kim represented Vitesse in this transaction that closed at the end of April.
For more information about the Public Securities Practice of Stubbs Alderton & Markiles, LLP, contact John McIlvery at (818) 444-4502 or
Press Contact:
Heidi Hubbeling
Director of Marketing
(310) 746-9803
Stubbs Alderton & Markiles Client Vitesse Semiconductor Corporation has announced that it has reached an agreement to be acquired by Microsemi Corporation for $389 million, furthering a drive toward consolidation in the semiconductor industry.
Vitesse, which has headquarters in Camarillo, CA, designs a diverse portfolio of high-performance semiconductors, application software, and integrated turnkey systems solutions for Carrier, Enterprise and Internet of Things (IoT) networks worldwide.
Based in Aliso Viejo, CA, Microsemi offers a comprehensive portfolio of semiconductor and system solutions for communications, defense & security, aerospace and industrial markets.
Stubbs Alderton & Markiles’ attorneys John McIlvery and Jonathan Friedman are representing Vitesse in this pending transaction.
For more information about our Public Securities practice, contact John McIlvery at .
Stubbs Alderton & Markiles has announced that it assisted client Malauzai Software, a provider of mobile banking SmartApps for community financial institutions, in its $6.48 million Round C investment led by Wellington Management Company, LLP. In previous rounds, Malauzai has raised approximately $5.3M.
SAM attorneys John McIlvery and Gaurav Krishan represented Malauzai in this transaction.
About Malauzai Software
Malauzai was incorporated in 2010 in response to the growing demand for a technology company that could provide innovative mobile solutions for community financial organizations. As a cool company in a cool town with a focus primarily on community financial institutions, Malauzai looks to provide mobile solutions that will enhance the customer experience ultimately resulting in increased value for financial institutions.
To view the full press release, click here.
For more information about our Venture Capital & Emerging Growth practice, contact Scott Alderton at or (818) 444-4501.
Los Angeles, October 11, 2013. Stubbs Alderton & Markiles, LLP announced that it advised client HemaCare Corporation in the sale of its Coral Blood Services subsidiary to the New York Blood Center (“NYBC”). Financial terms of the transaction were not disclosed. Coral’s 24 employees have been offered equivalent positions at NYBC.
In addition, NYBC and HemaCare have signed an agreement granting HemaCare access to NYBC’s 22 metro New York area collection centers. This allows HemaCare to further support the skilled, standardized apheresis collection services required for cell therapy and immunotherapy clinical trials of HemaCare’s rapidly growing list of BioResearch Products and Services customers.
SAM Partner John McIlvery, and attorney Jonathan Friedman advised HemaCare Corporation in this transaction.
To read the full press release, click here.
Los Angeles– June 26, 2013 - Stubbs Alderton & Markiles, LLP announced that it advised client Vitesse Semiconductor Corporation (Nasdaq VTSS) in an underwritten public offering of 18,720,000 shares of its common stock at a price to the public of $2.15 per share. The offering closed on June 25, 2013.
Vitesse designs a diverse portfolio of high-performance semiconductor solutions for Carrier and Enterprise networks worldwide. Vitesse products enable the fastest-growing network infrastructure markets including Mobile Access/IP Edge, Cloud Computing and SMB/SME Enterprise Networking.
To read Vitesse’s full press release, click here.
The Stubbs Alderton & Markiles, LLP team advising Vitesse included John McIlvery and Jonathan Friedman.
About Stubbs Alderton & Markiles, LLP
Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions and intellectual property practice groups focusing on the representation of venture-backed emerging growth companies, middle-market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel, and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm.
Contact:
Heidi Hubbeling
Director of Marketing
Stubbs Alderton & Markiles, LLP
The NASDAQ Stock Market, LLC (Nasdaq) has proposed rules to adopt new listing standards for compensation committees and for the selection of compensation advisers in a filing with the Securities and Exchange Commission (SEC) on September 25, 2012. The Nasdaq proposed rules are subject to public comment and SEC approval. Once finalized, these listing standards will implement SEC Rule 10C-1, adopted pursuant to Section 10C(a) of the Securities Exchange Act of 1934 and Section 952 of the Dodd-Frank Act, which directs the national securities exchanges to establish listing standards for compensation committees and the selection of compensation advisers.
Standing Compensation Committee
For the first time, Nasdaq will require a listed company to have a standing compensation committee comprised of at least two members. Recognizing that responsibility for executive compensation decisions is one of the most important responsibilities entrusted to a board of directors, Nasdaq is proposing to eliminate the current alternative of allowing compensation decisions to be made by a majority of independent directors in favor of such decisions being made by a standing committee dedicated solely to oversight of executive compensation. The proposed rules also establish a requirement to adopt a compensation committee charter and to review and assess the adequacy of such charter on an annual basis.
Compensation Committee Composition
As proposed by Nasdaq, compensation committees must be comprised of at least two members. Each member of the compensation committee must:
General Independence. Currently, Nasdaq has a two-part test for independence under Rule 5605(a)(2). In addition to certain categories of directors who cannot be considered independent, the board must make an affirmative determination that the director has no relationship that, in the opinion of the board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Nasdaq has proposed to leave unchanged its two-part test for independence under Rule 5605(a)(2).
Prohibition on Compensatory Fees. Nasdaq has proposed a bright-line test that would prohibit a compensation committee member from receiving, directly or indirectly, any consulting, advisory, or other compensatory fees while serving on the compensation committee, other than compensation for board service or the receipt of fixed amounts of compensation under a retirement plan for prior service with the listed company. This approach is consistent with eligibility standards for service on audit committees.
Company Affiliations. Nasdaq also considered to what extent a director’s affiliations should be considered in determining the director’s eligibility for service on the compensation committee. Distinguishing compensation committees from audit committees, Nasdaq concluded that “a blanket prohibition would be inappropriate for compensation committees,” acknowledging that “it may be appropriate for certain affiliates, such as representatives of significant stockholders, to serve on compensation committees since their interests are likely aligned with those of other stockholders in seeking an appropriate executive compensation program.” While the proposed Nasdaq rules require that boards of directors consider whether any affiliations would impair a director’s judgment as a member of the compensation committee, Nasdaq does not propose any bright-line rules. Also, there is no “look-back” period; consequently, the board need only consider affiliation with respect to relationships that occur during the director’s service on the committee.
Exemptions
Nasdaq proposes to retain its existing exception that allows a non-independent director to serve on the compensation committee under “exceptional and limited circumstances.” If a compensation committee consists of at least three members, one director who is not independent and meets certain other tests may serve on the compensation committee for up to two years if the board, under exceptional and limited circumstances, determines that the director’s service on the committee is required by the best interests of the company and its stockholders.
Smaller Reporting Companies
Nasdaq proposes to require smaller reporting companies to have a compensation committee comprised of at least two Independent Directors. Smaller reporting companies would not need to adhere to the new requirements relating to compensatory fees and affiliation. Smaller reporting companies also would be required to adopt a formal written compensation committee charter or board resolution that includes the same content as other companies; however, they would not need to incorporate into their charters or board resolutions the language in Rule 10C-1 regarding authority to retain and fund compensation consultants and counsel and responsibility to consider the independence of advisers and counsel, nor would they be required to review and reassess the adequacy of the charter or board resolutions annually.
Cure Period
SEC Rule 10C-1(a)(3) requires national exchanges to provide appropriate procedures for listed companies to have a reasonable opportunity to cure any noncompliance with the compensation committee standards that could result in the delisting of the company’s securities. The listing standards may also provide that if a member of the compensation committee ceases to be independent for reasons outside of the member’s reasonable control, that person, with notice by the company to the applicable exchange, may remain on the compensation committee until the earlier of the next annual meeting of stockholders or one year from the occurrence of the event. Nasdaq adopted the SEC’s cure period, modified to provide that if the company’s annual stockholders’ meeting occurs within 180 days following the event that caused the noncompliance, the company will instead have 180 days from the date of the event to cure the noncompliance.
Independence of Consultants and Counsel
SEC Rule 10C-1 provides that compensation committees are not required to select consultants, counsel or other advisers that are “independent,” but instead, in making their selections, compensation committees must take into account the following six factors, which bear upon independence:
Nasdaq concluded that these six independence factors were adequate and did not propose any additional factors in its listing standards.
Anticipated Effective Dates and Transition Period
Nasdaq’s proposed rule relating to the compensation committee’s responsibilities and authority, including the responsibility to consider the independence of compensation advisers, would be effective immediately following SEC approval. The remaining provisions, including compensation committee independence requirements, would become effective on the earlier of the company’s second annual meeting held after the date of approval of the proposed rules, or December 31, 2014.
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John McIlvery, Partner and Chair of the Public Securities Practice Group at Stubbs Alderton & Markiles, LLP discusses the rules proposed by Nasdaq governing the listing standards for compensation committees and for the selection of compensation advisors.
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For more information about the Public Securities Practice at Stubbs Alderton & Markiles, LLP, contact John McIlvery at or (818) 444-4502.
Sherman Oaks, CA - September 17, 2012 - Stubbs Alderton & Markiles, LLP announced that it advised IRIS International, Inc. (Nasdaq: IRIS), a leading manufacturer of automated in-vitro diagnostics systems and consumables, and a provider of high value personalized medicine solutions, in its agreement to be acquired by Danaher Corporation (NYSE: DHR) for $19.50 per share in cash, representing an approximate 45% premium over the closing price of IRIS's common stock on September 14, 2012.
César M. García, Chairman, President and Chief Executive Officer of IRIS International stated, "The Board of Directors voted unanimously to accept Danaher's proposal as it provides for an immediate compelling cash premium realization for our shareholders. Further, IRIS will benefit from being a part of a larger organization with significant resources to enable the acceleration of its diversified product pipeline strategy."
The Stubbs Alderton & Markiles, LLP team advising IRIS included John McIlvery, Partner and Chair of the Public Securities Practice, Jonathan Friedman, and Sean Greaney.
About Stubbs Alderton & Markiles
Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions and intellectual property practice groups focusing on the representation of venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm.
By: Susan Wong
(May 16) The SEC’s Division of Trading and Markets has published Frequently Asked Questions guidance on its website regarding the implementation of the crowdfunding intermediary provisions of Title III of the JOBS Act. The crowdfunding exemption will require issuers to use intermediaries – either a broker or a “funding portal” registered with the SEC – to complete crowdfunded offerings. Funding portals will also be required to become members of a national securities association registered under Section 15A of the Exchange Act. Currently, FINRA is the only such association in existence. Intermediaries will be subject to the duties and prohibitions prescribed by the JOBS Act, the rules and regulations the SEC will adopt thereunder, as well as the rules and regulations of their applicable association.
Please note that the FAQs (i) are subject to update and revision at any time, (ii) are not rules, regulations or statements of the SEC, and (iii) have been neither approved nor disapproved by the SEC. The crowdfunding intermediary FAQs can be found at: http://www.sec.gov/divisions/marketreg/tmjobsact-crowdfundingintermediariesfaq.htm
Currently, the FAQs provide as follows:
Responses to Frequently Asked Questions
Question 1.
I would like to operate a crowdfunding intermediary. Am I required to register with the SEC before doing so?
Answer:
Yes. You must register with the SEC either as a broker or as a funding portal.
Please keep in mind that the SEC still has to write rules to implement the crowdfunding provisions of the JOBS Act. Until the SEC has completed this rulemaking, you cannot act as a crowdfunding intermediary, even if you are already a registered broker. The Division of Corporation Finance also has reminded issuers that any offers or sales of securities purporting to rely on the crowdfunding exemption would be unlawful under the federal securities laws until the SEC’s rulemaking is complete.
Question 2.
How do I register with the SEC as a funding portal?
Answer:
The SEC must adopt rules governing funding portals before permitting anyone to register with the SEC as a funding portal. These rules will address the form and process needed to register with the SEC as a funding portal.
Funding portals also must become members of a national securities association that is registered under Section 15A of the Exchange Act. Today, FINRA is the only national securities association in existence that is registered under Section 15A of the Exchange Act.
Question 3.
I would like to operate as a funding portal. Do I need to register with the Financial Industry Regulatory Authority (FINRA)?
Answer:
All funding portals must become members of a national securities association that is registered under Section 15A of the Exchange Act, in addition to registering with the SEC. Today, FINRA is the only national securities association in existence that is registered under Section 15A of the Exchange Act.
Question 4.
Are there are any limitations on what a funding portal can do?
Answer:
Among other things, the JOBS Act imposes several restrictions on the activities of a registered funding portal. A funding portal is not permitted to:
In addition, each funding portal and each crowdfunding broker is prohibited from:
Question 5.
I would like to operate a crowdfunding intermediary. In addition to registering with the SEC and a national securities association, what should I know?
Answer:
There are many considerations in determining whether to operate a crowdfunding intermediary. At a minimum, you should understand the legal obligations that the JOBS Act assigned to crowdfunding intermediaries. For example, crowdfunding brokers and funding portals have significant duties under the JOBS Act to provide information to investors, reduce the risk of fraud and, where required under the Act, ensure that investors and issuers satisfy the requirements outlined in Title III of the JOBS Act.
The JOBS Act requires these intermediaries to, among other things:
In addition, under the JOBS Act, an intermediary should be aware of the prohibited activities listed in response to Question 4.
For more information regarding this Alert, other provisions of the JOBS Act or crowdfunding initiatives, contact John McIlvery, Group Chair of SAM’s Public Securities practice area at (818) 444-4502.
It’s official. Crowdfunding is law.
What is crowdfunding? Crowdfunding has been used to describe a number of methods that enterprises and collections of people may use to fund or support various initiatives. For startup companies looking to raise debt or equity from the sale of securities, crowdfunding refers to raising such funds, primarily over the Internet, in smaller amounts from a larger pool of investors though intermediaries.
On March 27, 2012, the House accepted the Senate version of the Jumpstart Our Business Startups Act (the “JOBS Act”) which provides for amendments to our securities laws to allow for crowdfunding activities. President Obama signed the JOBS Act into law on April 5, 2012. In order for crowdfunding to get underway, the SEC and other regulatory agencies will need to adopt certain rules and regulations implementing the new law. The law provides that these measures should be adopted within 270 days of signing by the President, and the SEC has already begun to collect comments from the public for this purpose.
This is exciting news for companies that are attempting to raise capital. Title IV of the JOBS Act will allow business enterprises to raise capital through crowdfunding initiatives. These companies can raise capital from individual investors by offering stock for sale through their third-party intermediaries. The JOBS Act adds a new Section 4(6) to the 33 Act, which provides a new exemption for the small business from registration for the offer and sale of securities in connection with crowdfunding transactions. The exemption would be available for offerings not greater than $1M in the aggregate during any twelve month period, subject to further limitation on a per investor basis. The amount sold to any particular investor during a twelve month period by all crowdfunding issuers may not exceed:
(A) for investors with less than $100,000 in net worth or annual income, the greater of $2,000 or 5% of their annual income or net worth, and
(B) for investors with greater than $100,000 in annual income or net worth, up to 10% of the investor’s annual income or net worth, not to exceed $100,000.
Securities issued pursuant to the new 4(6) exemption will be considered (1) “covered securities” which means that they will be exempt from state Blue-Sky registration and (2) “restricted securities,” subject to Rule 144 restrictions for public resales. The one-year restriction on resale described above would apply to private as well as public resales. Another benefit to small businesses – the crowdfunded investors will not count against the shareholder cap for triggering public reporting requirements with the SEC.
As described above, sales of securities under the new crowdfunding exemption must occur through third-party intermediaries. Who can serve as an intermediary? An intermediary must be a registered broker or funding portal (as defined in new Section 3(a)(80) of the 34 Act). It is not specified whether the intermediaries must be an electronic system or manual brokerage operation.
Regulations still need to be adopted regarding these intermediaries. Funding portals will be required to register with the SEC and any applicable self-regulatory organization, but are conditionally exempt from registration as a broker dealer. It is expected that FINRA will become the self-regulatory organization.
What will it cost? Restrictions regarding fees and how much an intermediary may charge an issuer or investor in connection with a transaction are not specified. However, the JOBS Act does provide that the intermediary and its directors, officers or partners cannot have a financial interest in an issuer using its services, which would presumably preclude taking stock for providing the service. Intermediaries also may not compensate promoters, finders, or lead generators for providing them with the personal identifying information of any potential investor. Other restrictions regarding disclosures, risk, cancellation and protection of privacy have been set in place for intermediaries and issuers to protect investors and reduce the risk of fraud with respect to such transactions. It is expected that these restrictions will be further clarified as the SEC adopts the needed regulations.
How does the JOBS Act compare against Rule 506 under Regulation D? Separate from the crowdfunding measures, the JOBS Act also requires that the SEC amend Rule 506 under Regulation D to permit allow general solicitation in 506 offerings in which sales are made only to accredited investors. It also provides for an exception from broker-dealer registration requirements for platforms or mechanisms that aim to facilitate offerings under Rule 506 of Regulation D. More specifically, a person (including a platform or other service provider and its associated persons) would not be obligated to register as a broker-dealer for engaging in any of the following:
(A) permitting offers, sales, purchases, negotiations, general solicitations or similar activities in connection with a 506 offering,
(B) co-investing in the 506 offering, or
(C) providing ancillary services, such as due diligence and documentation, in connection with the 506 offering.
To be eligible for this exemption, however, the person and its associated persons:
(A) may not receive any compensation in connection with a purchase or sale in the 506 offering,
(B) may not have possession or control of customer funds or securities in connection with a purchase or sale in a 506 offering, and
(C) may not be subject to statutory disqualification, as defined in the 34 Act.
Rule 506 may therefore serve as an alternative type of “crowdfunding” exemption for accredited investors without any of the limitations in related to the new Section 4(6) exemption for crowdfunding.
This is an exciting time for emerging growth and other small companies who now have additional innovative opportunities to raise capital. We will continue to monitor this development provide updates as they become available. For more information regarding this Alert, contact John McIlvery, Group Chair of SAM’s Public Securities practice area.
SA&M client, Xinergy Corp., a subsidiary of Xinergy Ltd., a company listed on the Toronto Stock Exchange (TSX:XRG) has just announced the closing of its Rule 144A sale of $200 million in aggregate principal amount of 9.25% Senior Secured Notes due 2019. The initial Purchaser Representative for the transaction was UBS Securities LLC. Xinergy Corp. is a U.S. Central Appalachian producer of high-quality coal. SAM Attorneys involved in the transaction included: John McIlvery, Louis Wharton and Sean Greaney.
To learn more about Xinergy Corp., visit their website at http://www.xinergycorp.com