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Securities Law 101
Kansas Adopted the First
Securities Law in 1911
Federal securities laws were
adopted in 1933 and 1934
Accredited Investor
• At least $1 million in net worth excluding primary residence or
• $200,000 in annual income
• $5 million for entities
Rule 501(a)
The 100%
Types of Investors
Professional
investors
0.3%
Non-
professional investors
99.7%
1.Do you want to be able to publicly
advertise?
2.Accredited investors only or everyone?
If everyone, how many unaccredited?
3.How much do you want to raise?
4. In what states are your potential
investors located? (just one? A few? All
of them?
Three categories of securities
offerings:
1.Private offering
a. to both accredited and
unaccredited
b. to accredited only
2.Public offering to accredited only
3.Public offering to both accredited and
unaccredited (aka Direct Public
Offering or Investment Crowdfunding)
1. Private Offerings
• No public advertising – mass emails, press
releases, social media, announcement on
web site, publicly advertised events . . .
• One-on-one conversations – doesn’t
necessarily mean you have to know
people
• Many lawyers will say accredited only,
but . . .
Recompose (Seattle) – Raised about
$500,000 so far – nonvoting preferred stock
Business is currently illegal!
2. Public Offering for Accredited
Investors – Rule 506(c)
• Unlimited public advertising
• You must do due diligence to ensure all
investors are accredited
• File Form D
• Created by Title II of the JOBS Act
•Platforms available e.g. Circle Up
3. Direct Public Offering aka
Investment Crowdfunding
Option 1: State Level Registration
• This has been available for
decades
Raised about $800,000
Nonvoting preferred stock
Based in Berkeley, CA
State Crowdfunding Laws
Option 2: Regulation A/A+
• Tier 1: up to $20 million state by state
registration; no audit required
• Tier 2: up to $50 million; no state
registration; audit required; state notice
filings may be required
• For both: “mini registration”
• Made possible by Title IV of the JOBS Act
Option 3: Crowdfunding Exemption
(Title III of the JOBS Act)
• No state level filings required
• Max raise: up to $1,070,000 per year (amount
increased regularly to keep up with inflation)
• Offerings must be conducted through a
registered intermediary
Crowdfunding Exemption
(Title III of the JOBS Act)
• Per Investor Cap:
• The greater of $2,200 or 5% of the lesser of the
investor’s annual income or net worth if either the
investor’s annual income or net worth is less than
$107,000; or
• 10% of the lesser of the investor’s annual income or
net worth, not to exceed an amount sold of $107,000, if both the investor’s annual income and net worth
are equal to or more than $107,000
• You can rely on the efforts of the platform
Crowdfunding Exemption
(Title III of the JOBS Act)
• More than $107k – reviewed financials
• Financials are public
• Annual reporting requirements – only one
report required if fewer than 300 holders of
record of the class of securities offered
• Investors can back out at the last minute
Crowdfunding Exemption
(Title III of the JOBS Act)
• File Form C
• There are limitations on what you can say
outside of the platform
Title III Platforms
Spotlight: Girls, Oakland, CA
Raised about $500,000 – equity and debt