Monthly Archives: April 2013
SEC Guidance On Social Media And Websites For Company Announcements And Communications- Part I
On April 2, 2013, the Securities Exchange Commission (“SEC”) issued a report confirming that companies can use social media, such as Facebook and Twitter, to make company announcements in compliance with Regulation Fair Disclosure (Regulation FD) as long as investors are alerted as to which social media outlet is being used by the company. The report was issued following an investigation into a Facebook posting made by Reed Hastings, CEO of Netflix. In the report the SEC stated that previously published guidance on the use of Company websites was applicable to the use of social media. Accordingly, a review of the SEC guidance on the use of company websites is in order.
Background
Regulation FD requires that companies take steps to ensure that material information is disclosed to the general public in a fair and fully accessible manner such that the public as a whole has simultaneous access to the information. Regulation FD is designed to ensure that all investors are on an even playing field in relation to access to material information. Regulation FD ended the era of invitation-only conference calls between company management and a select group of brokers and investment bankers, in which plans and earnings would be discussed and material information shared in advance of such information becoming public knowledge. In its report issued on April 2, 2013, the SEC confirmed that Regulation FD applies to social media in the same manner it applies to company websites.
SEC guidance on the use of company websites
The SEC issued its Commission Guidance on the Use of Company Websites, effective August 7, 2008, which guidance remains applicable today. A complete copy of the guidance is available on the SEC website and is summarized in this series of blogs, with this being Part I. In general the SEC encourages the use of company websites, and technology generally, to provide information to investors, provide analytical tools, and as a source of overall market transparency. The guidance focuses on:
(1) When information posted on a company website is “public” for purposes of the applicability of Regulation FD;
(2) Company liability for information on websites, including previously posted information; hyperlinks to third-party information; summary information and the content of interactive websites;
(3) The types of controls and procedures advisable with respect to website information; and
(4) The format of information presented with a focus on readability, not printability.
Overview of Exchange Act Rule on the Use of Company Website
As an overarching principle, the SEC recognizes company websites as a means of providing and delivering information on a scale similar to the EDGAR database. Moreover, the SEC goes so far as to confirm that the electronic delivery of information, whether through a website, the EDGAR database, electronic mail, or the like, is the preferred method above all other forms of delivering or providing information. In fact, proxy materials are required to be posted and be publicly accessible on a company website (see SEC Internet Proxy Release). The SEC further promotes the use of websites by requiring that:
- Companies disclose their website address in their annual Form 10-K’s and state whether their Exchange Act reports are available on the site (Regulation S-K Item 101(e));
- Mutual funds disclose in their prospectus whether reports are on their website and if not, provide an explanation (see Item 1(b) of Form N-1A);
- Companies make their reports available on their website as a precondition to incorporating such reports by reference in a Form S-1 or S-11 (see general instructions to Form S-1 and S-11);
- Companies post all beneficial ownership reports under Section 16 on their website (see Exchange Act section 16(a)(4(C) and Rule 16a-3(k);
- Companies post on their website notice of an intent to delist or deregister their securities (see Exchange Act Rule 12d2-2(c)(2)(iii);
- In addition, the SEC strongly suggests that XBRL interactive data be posted on a company website.
Moreover, the SEC now allows a Company to meet certain Exchange Act filing requirements by posting information on either their website or the EDGAR database. In particular,
- A company may disclose non-GAAP financial measures and Regulation G required information on its website;
- An asset-backed issuer may post disclosures of static pool data on its website;
- A company may provide its audit, nominating or compensation committee charters on its website;
- A company may disclose a material amendment to its code of ethics, or a material waiver of a provision of its code of ethics, on its website (rather than file a Form 8-K); and
- A company may provide information regarding board member attendance at the annual shareholder meeting on its website.
In Part II of this series I will address when information posted on a company website is “public” for purposes of the applicability of Regulation FD.
The Author
Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys
LAnthony@LegalAndCompliance.com
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Contact Legal & Compliance LLC. Technical inquiries are always encouraged.
Follow me on Facebook, LinkedIn, YouTube, Google+, Pinterest and Twitter.
Download our mobile app at iTunes.
Legal & Compliance, LLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
This information is not intended to be advertising, and Legal & Compliance, LLC does not desire to represent anyone desiring representation based upon viewing this information in a jurisdiction where this information fails to comply with all laws and ethical rules of that jurisdiction. This information may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.
© Legal & Compliance, LLC 2016
Structuring The Private Placement Or Venture Investment- Pre-Deal Considerations
I recently blogged about how to determine valuation in a start-up or development stage entity for purposes of structuring a prepackaged private placement, or for negotiating the venture capital transaction. I followed that blog with one explaining the various types of financial instruments that can be used for an investment.
Before a company can package a private placement offering or effectively negotiate with a venture or angel investor, it has to have its proverbial house in order. This blog circles back to the beginning discussing pre-deal considerations.
General
In order to successfully attract quality investors, a company must have its financial and legal house in order. I always advise my clients to act as if they are public, even if they never intend to go public. What is meant by that is to maintain proper corporate books and records. Draft and sign minutes of meetings of the board of directors, officers or committees. Keep systems in place to make sure that upper management is informed of events affecting their jurisdiction. Keep proper financial records utilizing a timely system such as QuickBooks. Maintain a corporate structure such that each person knows his or her area of control and on the other side, nothing material is falling through the cracks. All of this takes extra effort, but at the end of the day the business will be more efficient and problems will identify themselves before they are too costly or disastrous. Moreover, maintaining a proper house will convey itself when dealing with investors.
Importantly, the Company should have a professional, complete business plan and separately a much shorter executive summary. This business plan and executive summary will be the “first impression” of the investor and will often provide the basis for their belief in management and desire to entertain the idea of an investment going forward.
In the case of a packaged private offering, the attorney will rely heavily on the business plan for portions of the private placement memorandum. In the case of a venture capital or angel investor, the business plan may be the only full disclosure document reviewed.
Besides the business plan and executive summary, most sophisticated investors like to see a PowerPoint presentation.
In addition, the Company executives should have an oral presentation prepared and practiced. This oral presentation is sometimes referred to as an elevator pitch. Venture capital and angel investors will often start with the elevator pitch and PowerPoint presentation before deciding whether they are sufficiently interested to review the executive summary and/or full business plan.
Financial Matters
Prior to speaking with investors, a company should ensure that their financial records are up to date, including ensuring that all tax returns have been filed. In addition, the company should have a clear understanding of the amount of funds it needs from investors and the intended use of proceeds. An internal analysis should be completed for extraneous expenses and out-of-date financial reporting systems. If the company has not done so, financial projections should be prepared illustrating key milestones and clearly stating underlying assumptions.
Legal Matters
A Company must make sure that its corporate books and records are up to date and properly maintained, which includes, as mentioned above, keeping proper board and minutes meetings. The state of incorporation should be checked to make sure that the corporation is in good standing and that all publicly available information is accurate and up to date. Handshake and verbal contracts or amendments should be memorialized in writing.
Likewise, the stock issuance and registrar of the company should be complete and up-to-date accounting for any options, warrants, or other convertible securities. Antiquated options and warrants should be canceled. Pre-emptive and other extraordinary shareholder rights should be examined for necessity; if they are not necessary, get rid of them.
Every prior security issuance should be examined for compliance with state and federal securities laws, and where there is a noncompliance corrective measure should be taken—including, where necessary, a rescission offering.
Intellectual property rights, if any, should be carefully reviewed and protections put in place. Patents and trademarks can greatly enhance the value of an entity. Where applicable, it should be certain that employees and independent contractors have executed nondisclosure agreements, work-for-hire, and intellectual property assignment agreements in favor of the company. In addition to analyzing existing protections and patentable rights, an analysis should be completed to ensure that a company is not violating the intellectual property rights of a third party. An intellectual property analysis is similar to a chain of title search. All potential claims by or against the company should be reviewed and addressed.
Litigation or matters that could result in litigation should be reviewed and analyzed for potential material adverse effects on the company.
All general regulatory matters should be reviewed—Is the company properly licensed to conduct its business in each jurisdiction that it conducts business? Is the company abiding by all foreign laws and regulations and cross-border laws and regulations, including treaties?
The Author
Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys
LAnthony@LegalAndCompliance.com
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Contact Legal & Compliance LLC. Technical inquiries are always encouraged.
Follow me on Facebook, LinkedIn, YouTube, Google+, Pinterest and Twitter.
Download our mobile app at iTunes.
Legal & Compliance, LLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
This information is not intended to be advertising, and Legal & Compliance, LLC does not desire to represent anyone desiring representation based upon viewing this information in a jurisdiction where this information fails to comply with all laws and ethical rules of that jurisdiction. This information may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.
© Legal & Compliance, LLC 2016
MARY JO WHITE HAS BEEN SWORN IN AS THE NEW CHAIR OF THE SEC
On April 10, 2013 Mary Jo White was sworn in as chair of the Securities and Exchange Commission (SEC). Ms. White was nominated by President Obama on February 7, 2008 and was confirmed by the U.S. Senate on April 8, 2013.
Chairman White is the first former prosecutor to lead the SEC. Chairman White served as the U.S. Attorney for the Southern District of New York from 1993 to 2002 where she specialized in prosecuting complex securities and financial institution frauds and international terrorism cases. She is the only woman to ever have held that position.
As set forth on the SEC website, ” Prior to becoming the U.S. Attorney for the Southern District of New York, Chairman White served as the First Assistant U.S. Attorney and later Acting U.S. Attorney for the Eastern District of New York from 1990 to 1993. She previously served as an Assistant U.S. Attorney for the Southern District of New York from 1978 to 1981 and became Chief Appellate Attorney of the Criminal Division. After leaving her U.S. Attorney post, Chairman White became chair of the litigation department at Debevoise & Plimpton in New York, where she led a team of more than 200 lawyers. Chairman White previously was a litigation partner at the firm from 1983 to 1990 and worked as an associate from 1976 to 1978.”
SEC Clears Social Media As An Acceptable Form For Company Announcements
On April 2, 2013, the Securities Exchange Commission (“SEC”) issued a report confirming that companies can use social media, such as Facebook and Twitter, to make company announcements in compliance with Regulation Fair Disclosure (Regulation FD) as long as investors are alerted as to which social media outlet is being used by the company. The report was issued following an investigation into a Facebook posting made by Reed Hastings, CEO of Netflix. The SEC declined to pursue an enforcement action against Mr. Hastings.
Regulation FD requires that companies take steps to ensure that material information is disclosed to the general public in a fair and fully accessible manner such that the public as a whole has simultaneous access to the information. Regulation FD is designed to ensure that all investors are on an even playing field in terms of access to material information. Regulation FD ended the era of invitation-only conference calls between company management and a select group of brokers and investment bankers, in which plans and earnings would be discussed and material information shared in advance of such information becoming public knowledge.
In its report issued on April 2, 2013, the SEC confirmed that Regulation FD applies to social media in the same manner that it applies to company websites. The SEC has previously issued guidance stating that company websites are an effective means of delivering information in compliance with Regulation FD, as long as the investing public has been informed that they are to look to the company website for such information.
In the short term, social media should be used cautiously and only after a company is comfortable that it has properly informed the investing community which social media site is being used. The current guidance and standards associated with posting information on a website apply to social media.
To be cautious, I would advise a company making social media postings to also file a Form 8-K and issue a press release informing the general public of the postings and disclosing which social media site it is using. In addition, companies that decide to use social media should create an account for the company and not allow management to use personal accounts for posting information regarding the company where an investor would not reasonably look for such information.
The Author
Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys
LAnthony@LegalAndCompliance.com
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Contact Legal & Compliance LLC. Technical inquiries are always encouraged.
Follow me on Facebook, LinkedIn, YouTube, Google+, Pinterest and Twitter.
Download our mobile app at iTunes.
Legal & Compliance, LLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
This information is not intended to be advertising, and Legal & Compliance, LLC does not desire to represent anyone desiring representation based upon viewing this information in a jurisdiction where this information fails to comply with all laws and ethical rules of that jurisdiction. This information may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.
© Legal & Compliance, LLC 2016