the new paradigm for raising capital the sec's new jobs act rules
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Presenters:
Alexander B. Kasdan, Managing Director
Mark T. Hiraide, Partner
The New Paradigm for Raising Capital: The SEC’s New JOBS Act Rules
August 22, 2013
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Alexander B. Kasdan is a Managing Director at DelMorgan & Co. He has more than twenty years of investment banking, real estate, corporate law and corporate strategy experience. Alex has executed over 100 domestic and cross-border transactions totaling more than $10 billion in overall volume in a variety of industries. Prior to joining DelMorgan, Alex founded Convergence Capital Partners, LLC, a boutique investment banking advisory and real estate investment firm and was an investment banker at Barrington Associates, Peter J. Solomon Company, Credit Suisse First Boston and Merrill Lynch. Alex practiced law with O’Melveny & Myers LLP (formerly O’Sullivan Graev & Karabell LLP) and Paul, Hastings, Janofsky & Walker LLP (formerly Battle Fowler LLP), where he specialized in mergers and acquisitions, private equity and corporate finance transactions. In addition, Alex served as Corporate Counsel in charge of business development at Schlumberger Ltd., a global oilfield and information services company. Alex graduated magna cum laude from Middlebury College with a B.A. degree in Economics and Italian and was elected to Phi Beta Kappa during his junior year. In addition, he holds a J.D. degree from Columbia University Law School and has studied at the University of Florence in Italy. Alex is admitted to the Bar in the State of New York. Alex is a Senior Advisor to Governance and Transactions LLC, an advisory firm established in 2003 by Mr. James L. Gunderson, former Secretary and General Counsel of Schlumberger Limited, to assist boards, management and owners with corporate governance, compliance, structuring and strategic transactions.
100 Wilshire Blvd. Suite 750 Santa Monica, CA 90401 (310) 980-1718 www.delmorganco.com ak@delmorganco.com
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Mark T. Hiraide is a Partner at Petillon Hiraide & Loomis LLP. He assists entrepreneurs raising capital in private and public securities markets. He defends directors, officers and auditors in civil litigation and in regulatory investigations before the SEC, FINRA and PCAOB. He prosecutes securities cases on behalf of investors and counsels companies listed on the NASDAQ, AMEX and OTCBB stock markets, privately held businesses and individual officers and directors in corporate finance and mergers and acquisition transactions and in litigation relating to liabilities under federal and state securities laws. Most recently, Mark was invited by the Securities Subcommittee of the U.S. Senate Banking Committee to testify about Crowdfunding, Regulation A, Regulation D, SOX 404, IPOs and other securities law issues relating to the JOBS Act. Prior to entering private practice, Mark was an attorney for the U.S. Securities and Exchange Commission. He was as an Attorney-Advisor with the SEC in the Division of Corporation Finance in Washington, D.C. and a Chief of one of the Enforcement Branches in the Los Angeles Regional Office. While at the Commission, he was also appointed as a Special Assistant United States Attorney to prosecute a major criminal securities fraud case. Mark received his B.A. (with honors) in 1981 from the University of California at Berkeley and his law degree in 1984 from the University of Southern California. In law school, he received a Merit Scholarship and served as a judicial extern to Justice Cruz Reynoso of the California Supreme Court and to the Honorable Robert M. Takasugi of the United States District Court, Central District of California.
21515 Hawthorne Blvd. Suite 1260 Torrance, California 90503 (310) 543-0500 www.phlcorplaw.com mhiraide@phlcorplaw.com
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ROLE OF AN INVESTMENT BANKER Articulate the investment proposition Provide third-party validation of investment thesis Advise company on adequate capitalization: short- and long-term
Prepare marketing materials and financial model Run an organized process / investor discussions Interact with management and board of directors /advisors Organize due diligence and management presentations Work with company to confirm accredited investor status Evaluate investment alternatives Negotiate best possible transaction Close the transaction
Mark T. Hiraide Petillon Hiraide & Loomis LLP Alex Kasdan, DelMorgan & Co.
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Title I: Reopening American Capital Markets to Emerging Growth Companies
Title II: Access to Capital for Job Creators Title III: Capital Raising Online While
Deterring Fraud and Unethical Non-Disclosure Act of 2012
Title IV: Small Company Formation Title V: Private Company Flexibility and
Growth Title VI: Capital Expansion Title VII: Outreach on Changes to the Law
Mark T. Hiraide Petillon Hiraide & Loomis LLP
IPO OnRamp Reg D Rule 506: General Solicitation Regulation A Crowdfunding Section 12(g) (“Facebook Issue”)
Mark T. Hiraide Petillon Hiraide & Loomis LLP
“Emerging Growth Company” Two Years Audited Financial Statements Draft IPO Submissions Testing-the-Waters Analyst Reports
Mark T. Hiraide Petillon Hiraide & Loomis LLP
SOX 404(b) Executive Compensation Disclosure Say-On-Pay Disclosure New Accounting Standards Auditor Rotation
Mark T. Hiraide Petillon Hiraide & Loomis LLP
$5M to $50M
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Mark T. Hiraide Petillon Hiraide & Loomis LLP
• Issuer: • $1M every 12
mo.s
• Investor: • <$100K: 5%/$2K • >$100K: 10% up
to $100K
• BD or “Funding Portal”
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Other Issuer Requirements
• Disclosure Document
• Target Offering and Deadlines
• No Advertising
• No Compensation for Promoting Offering
MAY NOT: (A) offer investment advice or recommendations; (B) solicit purchases, sales, or offers to buy the securities
offered or displayed on its website or portal; (C) compensate employees, agents, or other persons for
such solicitation or based on the sale of securities displayed or referenced on its website or portal;
(D) hold, manage, possess, or otherwise handle investor
funds or securities; or (E) engage in such other activities as the Commission, by
rule, determines appropriate.
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Section 12(a)(2) Liability
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Title II Reg D Rule 506 and Rule 144 Reform
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Non-Financial Information › Accredited Investors › Non-accredited Investors
Financial Statement Information › < $2M: Audited balance sheet w/in 120 days › >$2M and <$7.5M: S-1 for smaller reporting
co.s › >$7M: registration statement
Mark T. Hiraide Petillon Hiraide & Loomis LLP
“Offers and sales [of securities] exempt under [Rule 506 of Regulation D] shall not be deemed public offerings under the Federal securities laws as a result of general advertising or general solicitation . . . provided that all purchasers of the securities are accredited investors.”
and provided "the issuer [of the securities] take[s] reasonable steps to verify that purchasers of the securities are accredited investors, using such methods as determined by the Commission."
Mark T. Hiraide Petillon Hiraide & Loomis LLP
SEC’s Non-Exclusive List › Income: Tax Returns
› Net Worth: Statements dated within the prior three months written representation that all liabilities
necessary to make a determination of net worth have been disclosed.
For liabilities a credit report from at least one of the nationwide consumer reporting agencies.
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Obtaining a written confirmation from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney, or a certified public accountant that such person has taken reasonable steps to verify that the purchaser is an accredited investor within the prior three months will satisfy the verification requirement.
Mark T. Hiraide Petillon Hiraide & Loomis LLP
Principles-Based Methods of Verifying Accredited Status
Nature of Purchaser and Type of Investor Amount and Type of Information About the
Purchaser Nature of Offering, such as manner of
solicitation
Mark T. Hiraide Petillon Hiraide & Loomis LLP
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