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SEC Rules and Regulations

IMPORTANT NOTICE TO PRESENTING COMPANIES:The Securities and Exchange Commission has adopted new rules that can complicate private placements and what a company can and cannot say during events such as Crossroads Venture Group sponsored events. A presentation at such an event could constitute a “general solicitation,” which could add complications and cost to compliance with applicable securities laws. Therefore, presenting companies must consult with experienced legal counsel prior to speaking at any such event. By presenting at a Crossroads Venture Group event, each presenting company acknowledges that (i) it is their responsibility to ensure compliance with applicable securities laws, including the content of its presentation, the making of appropriate regulatory filings and the inclusion of appropriate disclaimers and legends on it’s presenting material, and (ii) neither the Crossroads Venture Group nor any of its representatives is responsible for any such compliance.


Although investment and fundraising are never simple endeavors, we hope this page can make things a little bit clearer.

The Securities and Exchange Commission, the federal organization that oversees investment, capital, and fair and free markets, is continually updating and refining the rules related to investment, with the ultimate goal of increasing efficiency and reducing fraud.  Despite the good intentions, these changes can be hard to follow and difficult to comprehend.

The JOBS Act, signed into Law by President Obama in April of 2012, changes some of these regulations in ways that are still being parsed and deciphered today.

On September 23, 2013, Forbes posted this article which does an excellent job of explaining the SEC rules on general solicitation, i.e., publicly announcing the fact that your company is seeking funding. The article explains that

“Publicly advertising an investment round includes, but is not limited to, the following activities:
1. Revealing that the private company is actively seeking investments.
2. Providing the details of the investment, such as the deal terms…”

“This includes traditional and online media, such as, but not limited to: 1. a mass newsletter/email, 2. a public profile on a startup investment platform, 3. a company, personal or third-party website that displays openly that a startup is fundraising, 4. public speaking engagements, such as conferences, panels, or forums, 5. social media such as Facebook, Twitter, Linkedin or others, 6. public videos”

As of September, according to the article, general solicitation is permitted, so long as certain stipulations are followed.  These requirements include, but are not limited to:

“1. Allow only accredited investors into the funding round.
The regulations state that if you do a Regulation D Rule 506 (b) offering, which is private fundraising, you can have up to 35 non-accredited investors participating in your round as long you have a pre-existing relationship with them. In the event you decide to carry out a public fundraising, you relinquish that option. Only verified accredited investors are permitted to invest in startups that are generally soliciting.

2. Verify that all these investors are accredited.
This means that from the time you start to generally solicit until the time you close your funding round, you will be required to provide official documentation to confirm that each investor meets the accredited investor threshold, according to the SEC requirements specified in Rule 501 of Regulation D.  This can be uncomfortable and burdensome for both investors and startups, but there are third-party services that do this…

3. Declare that a 506(c) publicly advertised offering was undertaken as part of the Form D filing.
You will have to file a Form D within 15 days of receiving your first investment.  This means you will have to declare that you publicly advertised your offering, under new 506(c) regulations.”

Since these laws are subject to variance and interpretation, it is always advised that you speak to an attorney before making any decisions that could affect the legal status of your company.

Two of our legal sponsors, Shipman & Goodwin and Wiggin and Dana have prepared informative documents that shed some light on the the new JOBS Act implications, including the general solicitation aspect which is highly relevant for CVG events, but also crowdfunding standards which can impact startups and growth stage companies.  Those documents are available below.

We hope this helps shed a bit of light into an admittedly murky area, but remember – CVG staff members are not attorneys, and you should always consult a legal professional before engaging in any fundraising or investing!

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