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Presented By:
Partner Firms:
July 14, 2016 1
CrowdStreet, Inc.Tore Steen
CEO, Co-Founder
DLA PiperDarryl Steinhause
Partner
Golan & Christie LLPRita W. Garry
Partner
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Partner Firms:
July 14, 2016 7
CrowdStreet is a software and services company disrupting the commercial real estate industry by enabling innovative real estate operators and developers to efficiently engage in online capital formation, communicate with investors, distribute investment documents and centralize ongoing investor relations.
CrowdStreet technology solutions provide real estate sponsors a scalable platform for managing a large investor-base.
The Real Estate Capital Markets group of DLA Piper builds creative solutions for your business needs. Our interdisciplinary approach ensures the involvement of skilled practitioners to address the complexities of real estate securities. Our group's experience acting as lead counsel on fund, REIT, DST, TIC and debt offerings, gives our clients an edge in capital markets transactions.
Your Success. Our FocusGolan & Christie is a business centric law firm staffed with business savvy and experienced litigation and transactional attorneys who put their clients’ needs and goals first and foremost. Golan & Christie’s attorneys and skilled staff work together to build strong client relationships and work together to support and drive their clients’ success. Please visit www.golanchristie.com to learn more about our people and our services.
Brief Speaker Bios:
► For more information about the speakers, you can visit: https://theknowledgegroup.org/event-homepage/?event_id=1608
July 14, 20168
Rita W. Garry
Rita W. Garry is a Partner with Golan & Christie in Chicago, IL. Rita’s 30+ years of work serving as a trusted business advisor to many diverse start-up, emerging, and mature businesses includes entity design and formation, founders agreements, corporate tax and regulatory compliance, review and negotiation of a vast array of commercial contracts, mergers, acquisitions and divestitures, debt and private equity financing transactions and private securities offerings. Rita is a published author on SEC private offerings under Regulation D and Crowdfunding under the JOBS Act and a frequent presenter on entrepreneurial law topics. Rita also served as an Illinois State Content Editor for Thomson Reuters’ Practical Law corporate and M&A product offering. Rita is a long-standing member of the ABA Business Law Section and its Middle Market and Small Business, Private Equity and Venture Capital, and Federal Securities Committees and she has written and spoken at seminars, symposiums, and meetings on numerous business and securities law topics including.
Tore Steen
Tore is a business leader in the internet and software industries with deep expertise in strategy, business development, sales, and marketing for both publicly traded and private enterprises.
Prior to CrowdStreet, Tore was instrumental in leading the product, sales, marketing, and business development efforts for Janrain, taking them from early stage rapid growth phases to becoming the recognized leader in the social identity space with a full user management platform and global enterprise customers. He has held senior leadership roles as the Vice President of Business and Corporate Development at WebTrends and Director of Business Development at EarthLink.
Darryl Steinhause
Darryl Steinhause has more than 30 years of experience in complex securities and tax transactions, representing both sponsors and investors in a range of deal structures. The Daily Journal selected Steinhause as one of the Top 100 Lawyers in California in 2014 for his work with clients looking to invest in new online real estate platforms. Steinhause was one of the first in his field to recognize the implications of the 2012 JOBS Act which amended Rule 506 of Regulation D of the Securities Act of 1933, and has been advising clients on both the potential and the complications of such platforms.
In the year 2015, according to a research and advisory firm, crowdfunding platforms in real estate investment have generated about $34.4 billion and is conservatively expected to greatly increase this year. The rapid growth has been spurred by a number of regulatory amendments made by SEC, thus, allowing companies to offer and sell securities through crowdfunding. The recent approval of the JOBS Act's Title III rules is expected to generate new activity for real estate crowdfunding.
In this LIVE Webcast, a seasoned panel of thought leaders and professionals brought together by The Knowledge Group will provide the audience with an in-depth discussion of the fundamentals as well as recent developments in Real Estate Crowdfunding.
Key topics include:
• Real Estate Crowdfunding Platform• Recent Trends and Developments in Real Estate Crowdfunding• Five Key Areas of Commercial Real Estate• Restrictions on Real Estate Crowdfunding• Scope and LimitationJuly 14, 2016 9
Featured Speakers:
SEGMENT 2:
Tore SteenCEO, Co-FounderCrowdStreet, Inc.
SEGMENT 3:
Darryl SteinhausePartnerDLA Piper
SEGMENT 1:
Rita W. GarryPartnerGolan & Christie LLP
July 14, 2016 10
Introduction
Rita W. Garry is a Partner with Golan & Christie in Chicago, IL. Rita’s 30+ years of work serving as a trusted business advisor to many
diverse start-up, emerging, and mature businesses includes entity design and formation, founders agreements, corporate tax and regulatory
compliance, review and negotiation of a vast array of commercial contracts, mergers, acquisitions and divestitures, debt and private equity
financing transactions and private securities offerings. Rita is a published author on SEC private offerings under Regulation D and
Crowdfunding under the JOBS Act and a frequent presenter on entrepreneurial law topics. Rita also served as an Illinois State Content
Editor for Thomson Reuters’ Practical Law corporate and M&A product offering. Rita is a long-standing member of the ABA Business Law
Section and its Middle Market and Small Business, Private Equity and Venture Capital, and Federal Securities Committees and she has
written and spoken at seminars, symposiums, and meetings on numerous business and securities law topics including
Ms. Garry received her law degree from Boston University and her B.A. in Politics from Lake Forest College, graduating Phi Beta Kappa with
High Honors. Ms. Garry also received her CFP license in 1991. She can be reached at [email protected] or (312) 696-1366.
July 14, 2016 11
SEGMENT 1:
Rita W. GarryPartnerGolan & Christie LLP
REAL ESTATE CROWDFUNDING: LATEST TRENDS & DEVELOPMENTS
12
Rita W. Garry | PartnerGOLAN & CHRISTIE LLP
70 W Madison, Ste 1500, Chicago, IL 60602 (312) 696- 1366
[email protected] www.golanchristie.com
www.linkedin.com/in/ritagarry 2016 Leading Lawyers Profile
Securities Laws & Private Offerings
The Securities Act of 1933 – Section 3 - Exemptions from Registration for
wholly intrastate offerings of securities Section 4 - Exemptions from Registration for
private (non-public) offerings of securities
13
Investor Protection is the Landmark: Anti-Fraud Provisions of federal and state
securities’ laws and regulations prohibit issuers from making untrue statements of material facts or omitting to state material facts required to be stated or necessary to make the statements, in light of the circumstances under which they are made, not misleading
14
Regulation D The SEC enacted Regulation D in 1984 and it has
served as the primary tool for entrepreneurs raising capital in private offerings for the last 30+ years.
Regulation D includes 3 main private offering safe harbors: Rule 504 - $1M Limit Rule 505 - $5M Limit Rule 506 - Unlimited Amount – Accredited Investors
Only15
Limits of Reg DDollar Ceilings
Qualified Investors
No Public Solicitation or General Advertisements
State Securities’ Laws Still Apply
16
THE JOBS ACT OF 2012 Congress passed The Jumpstart Our Businesses
Act in April, 2012 with only 4 “no” votes. Title I Emerging Growth Companies On-
Ramp Title II General Solicitation Title III Crowdfunding Title IV Regulation A
17
Regulation A& Title IV of the JOBS Act
REGULATION A+ Tier 1 Offerings - $20M Tier 2 Offerings - $50MAfter JOBS Act, Reg A+ offers issuers more options:
$50M CeilingSimplified Registration Statement (Form 1-A)Public Solicitation to “Test the Waters”No Restrictions on Resale
No Requirement for Audited Financial prior to Offering 18
Bad Actor Disqualification The “bad actor” disqualification provisions contained
in Rule 262 of Regulation A disqualify securities offerings from reliance on Regulation A if the issuer or other relevant persons (such as underwriters, placement agents, and the directors, officers and significant shareholders of the issuer) (collectively, “covered persons”) have experienced a disqualifying event, such as being convicted of, or subject to court or administrative sanctions for, securities fraud or other violations of specified laws.
19
Bad Actor- Covered Person Covered persons” include: the issuer, including its predecessors and affiliated issuers directors, general partners, and managing members of the issuer executive officers of the issuer, and other officers of the issuers
that participate in the offering 20 percent beneficial owners of the issuer, calculated on the
basis of voting power promoters connected with the issuer in any capacity persons compensated for soliciting investors, including their
directors, executive officers or other officers participating in the offerings, general partners and managing members
20
Bad Actor-Disqualifying Events
Under the final rule, disqualifying events include: Certain criminal convictions Certain court injunctions and restraining orders Certain final orders of certain state and federal regulators Certain SEC disciplinary orders Certain SEC cease-and-desist orders Suspension or expulsion from membership in a self-regulatory
organization (SRO), such as FINRA, or from association with an SRO member
SEC stop orders and orders suspending the Regulation A exemption U.S. Postal Service false representation orders
21
General Solicitation Title II- Rule 201(a)(1) amends Rule 502(c) of Regulation
D to make the prohibition on general solicitation inapplicable to offers and sales under Rule 506(c) provided all purchasers are “Accredited Investors” & Issuer has taken reasonable steps to verify that status
Accredited Investors (Rule 501) = $1M Net Worth (exclude residence) or Annual Income ($200k or $300k for couples) Test
Other Qualified Entities
22
Equity Crowdfunding Title III of the JOBS Act and Reg. CF (adopted nearly 4
years after the act) create the unique exemption from registration under Section 4(a)(6) of the ‘33 Act for offers and sales of “securities” up to $1M (in 12 month period) from non-accredited investors AND using General Solicitation (the “Wisdom of the Crowd”) using Internet portals specifically designed and regulated to provide a level of investor protection.
23
Regulation CF Snapshot $1 Million offering limit Available for use only by U.S. domestic business enterprises Offerings must be conducted through broker-dealer or funding portal
intermediaries Offerings must be made through intermediaries’ publicly accessible internet
platforms Broker-dealers or funding portals may earn commissions and success fees Issuers and intermediaries must disseminate an SEC filed offering statement
to prospective investors No pre-commencement SEC review or clearance required for offering
statement Intermediaries must maintain communication channels to foster the
“wisdom of the crowd” Off-platform advertising limited to “tombstone” type notices Side-by-side crowdfunding offerings and Reg D-Rule 506(c) offerings are
permitted
24
Real Estate and Crowdfunding Google search for these two words returns 650,000
results:www.lendinghome.com www.wecrowdfundrealtydeals.comwww.fundrise.com www.realtymogul.comwww.realtyshares.com www.ifunding.com www.crowdstreet.com
25
What is Real Estate Crowdfunding?
Crowdfunding is a new tool for raising money for businesses and an easier way to access such ventures for investors. It utilizes social media outlets like Facebook, Twitter and LinkedIn to reach an audience of potential investors. The idea behind crowdfunding is that many people are willing to invest a small amount, and when they do, large sums of money can be raised quite quickly. It opens doors for businesses to investors they could never reach otherwise.
In the past, real estate development was only available for investment through private equity in the development company or through real estate investment trusts (REITs) and was not feasible as a direct investment for most individuals. This is because each real estate development venture is a finite project, and registering each product as a security, even under Regulation D filings, is inefficient. Furthermore, real estate developers were not allowed to actively market or solicit investments for their projects due to restrictions by the Securities and Exchange Commission (SEC).
As the concept of crowdfunding was growing, the Jumpstart Our Business Startups Act of 2012 modified certain rules under Regulation D that opened the door for more direct marketing and solicitation to accredited investors. Now, real estate developers can rely on crowdfunding sites to solicit investments from high-net-worth investors who are eager to make an investment in this market. The SEC is reviewing material in an attempt to open this market up to all investors, but for now, crowdfunding sites must classify each investor to ensure they qualify to make private investments in real estate in this manner. It is the hope that the online investment market for real estate will flourish in the coming years, giving investors a great alternative.
Read more: What is real estate crowdfunding? | Investopedia http://www.investopedia.com/ask/answers/100214/what-real-estate-crowdfunding.asp#ixzz4DZmyreGa Follow us: Investopedia on Facebook
26
FIX CROWDFUNDING ACT• Title III and Reg CF get a “fix”!
– On July 5, 2016 HR 4855 passed on a 394 to 4 vote to further expand equity crowdfunding:
Enable “Testing the Waters” for CF offerings Raise the funding amount to $5M Clarify Transaction Caps to “the greater of” Allow use of Single Purpose Vehicles or SPVs for
investor pooling27
Contact Information:Rita W. Garry
Golan & Christie70 W. Madison Street
Suite 1500Chicago, IL 60602
T: 312-696-1366E:
The information provided in this presentation is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services. Rather, the content is intended as a general overview of the subject matter covered. Golan & Christie, LLP is not obligated to provide updates on the information presented herein. Those viewing this information are encouraged to seek direct counsel on legal questions.
28
July 14, 2016 29
SEGMENT 2:
Tore SteenCEO, Co-FounderCrowdStreet, Inc.
Introduction
Tore is a business leader in the internet and software industries with deep expertise in strategy, business development, sales, and
marketing for both publicly traded and private enterprises.
Prior to CrowdStreet, Tore was instrumental in leading the product, sales, marketing, and business development efforts for Janrain,
taking them from early stage rapid growth phases to becoming the recognized leader in the social identity space with a full user
management platform and global enterprise customers. He has held senior leadership roles as the Vice President of Business and
Corporate Development at WebTrends and Director of Business Development at EarthLink.
Tore earned a Master of Business Administration from Duke University and a Bachelor of Arts in political science from the University of
Notre Dame.
CrowdStreet Presentation
© 2015 CrowdStreet, Inc. All rights reserved.
CROWDFUNDING
17
KEY TAKE-AWAYS
• Debunk the “crowdfunding” myths
• Learn the facts about Online Capital Raising
• Case Studies
• Discover how to apply to your business
A BRIEF HISTORY
• JOBS Act: Advertise Private Placements, Online Equity Investing Portals
• Cloud-based technology advancements
• Consumer behavior migrated online
• “Uberization of Money” - WSJ Article 11/6/2015
GENIUS IDEA
OR
GENIUS IDEA
What’s the matter Bill, you have to raise money on Facebook now?
This will end worse than the TIC debacle.
Just wait until grandma loses her money,then crowdfunding will implode.
Offering my investors an online portal is critical to both of us.
I’m investing in tech thatimproves my investor experience.
Better business model thanhigh-load non-traded REITS.
17• Fundraising (debt & equity)
• Investor Management
• e-Funding & Advisory
• Institutional & Retail Capital Sources Participating
CROWDFUNDING = ONLINE CAPITAL FORMATION
Marketplaces• Direct to Investor (CrowdStreet)
• SPV Investment Manager (RealtyMogul, RealtyShares)
• P2P Lenders (Patch of Land, PeerStreet)
• eREIT (Fundrise)
Sponsor Direct• Cloud-based, White-label software (CrowdStreet)
Funding Platform Business Models
• Direct to Investor - flat fees (for technology and services)
• SPV Investment Manager - commissions, spread & carried interest
• P2P Lenders - origination points & spread
• eREIT - FFO
• Cloud-based, White-label software - software license fees
How do Funding Platforms Make Money?
• How big is the debt & equity transaction market? Divide by 10.
• $1 Billion+ of annual capital flow
• 100,000+ transactions per year
• Early Adopters lead the way for mass market
How Big is the Market?
• eCommerce did not replace brick & mortar, it supplemented it
• CRE sponsors add online channel to existing fundraising methods
• 10% of required equity in 2016, rising to 25% by 2019 (forecast)
• Growth engine
• Get on board or get left behind...seriously, become a dinosaur
Multichannel Fundraising
17• Varies widely based on the portal
• Avg Project raises $1-$3M; Predicted to grow to $3-$5M by 2018
• Avg investment size by accredited investors: $50K, yet as small as $5,000on certain SPV & P2P platforms
• Avg timing: 30-60 days
How Much Money Can I Raise on a Funding Platform?
© 2015 CrowdStreet, Inc. All rights reserved.
SUCCESS STORIES
Intellistay HospitalityIntellistay Booneville
A high-yielding Missouri hotel investment opportunity with upside opportunity• 30 Investors• $810,000 raised
Intellistay Lima
A high-yielding Ohio hotel investment opportunity with upside potential• 112 Investors• $3,500,000 raised
• Intellistay’s initial engagement with CrowdStreet (Booneville) yielded 30 new investors and a $810k raise.
•Many of these 30 investors returned for Intellistay’s second CS deal (Lima) along with a large volume of new investors - bringing the total to 112 new investors and a $3.5 million dollar raise.
• Mezz Debt: 9-13%. Origination points. Annual Servicing Fees.
• Equity: 7-9% Pref; Mid teens IRR
• Sponsor fees must be fully disclosed
• Sponsor must have “skin in the game”
• Capital stack alignment
What’s the Cost of Capital?
• Typically mezz debt or pref equity• Senior debt only on SFR fix & flip
• Percentage of total capital raise: 10% - 100%
How syndicated equity/debt fits into your capital stack
Everest (Small-Mid Cap)Encore Phoenix (Large Cap) Olympus (Equity Fund)
17
1. Define your objectives
2. Interview leading funding platforms, pick the best one for you
3. Budget time & resources
4. Confirm legal & securities positions
5. Build your own online capabilities directly from your website
6. Pick the best deal and GO!
7. Monitor campaign on weekly basis for optimal results
Steps to Get Started
SUCCESS STORIES
Denholtz Associates
1. Customer Profile: Denholtz Associates• History: In 60 year history have syndicated 25M+ sq ft in
transactions (4.5M today)• Asset Types: Office, Industrial• Tech Stack: Yardi, home-grown Microsoft Access IRM solution• Properties: 30 (active in Sponsor Direct)• Investors: ~500 (imported into Sponsor Direct)
2. Problem• Lack a technical solution to support investor management and
fundraising, using a homegrown MS Access solution that wasn’t scaling with their business
• Initially interested in fundraising for new posting, but quickly refocused on delivering an end-to-end platform when learned more about the CrowdStreet solution
3. Solution• Initial: CrowdStreet Sponsor Direct (IRM for funded deals)• Add-On: Fundraising for new deals (dual-posted on CrowdStreet
Marketplace)
• Everyone will raise capital or invest online by 2026
• Tech-enabled capital advisory, e-Funding = fewer middlemen
• Broad adoption: institutional to unaccredited investors
• Global capital flow
• Updated SEC FINRA regulations
What’s Next for Private Equity Online Capital Formation?
Real estate developers, operators and capital providersFor:
CrowdStreet Provides: Comprehensive online fundraising and investor management solutions
Acquire and nurture new investors and build investor networks for present and future deal flow
Differentiated:
Marketplace Sponsor Direct (SaaS solution)
Benefit from our 80+ years of deep CRE + technology experience
To grow their investor base, manage their existing and future investors, and improve the efficiency and effectiveness of their fundraising activities
Who Need:
© 2015 CrowdStreet, Inc. All rights reserved.
Customers
Multifamily Office Retail Hospitality
Senior Housing Medical
StorageOther Industrial
July 14, 2016 50
SEGMENT 3:
Darryl SteinhausePartnerDLA Piper
Introduction
Darryl Steinhause has more than 30 years of experience in complex securities and tax transactions, representing both sponsors and
investors in a range of deal structures. The Daily Journal selected Steinhause as one of the Top 100 Lawyers in California in 2014 for
his work with clients looking to invest in new online real estate platforms. Steinhause was one of the first in his field to recognize the
implications of the 2012 JOBS Act which amended Rule 506 of Regulation D of the Securities Act of 1933, and has been advising
clients on both the potential and the complications of such platforms. Steinhause has been recognized as an industry expert at the
forefront of this exciting new area of opportunity, and has spoken on the subject of crowdfunding at numerous conferences since the
Rule changed in 2012.
I. What Has Changed?
1. Rule 506(c)a. New rules – Jobs Actb. Advertise c. Check the Boxd. Only accredited investors
52
2. Platformsa. Based on AngelList and FundersClub
i. Platforms are not required to register as broker-dealers?
ii. What does AngelList and Funders Club mean?b. Nothing to do with Jobs Act – Based on SEC no action
letters –- not a change in lawc. Three basic types of platforms
i. Statutoryii. Issuer directiii. Separate LLC’s created to invest
53
I. What Has Changed?
d. Structures:i. Sponsor operates a websiteii. Sponsor sets up an LLC to make investment in
securities (fund structure)iii. Investment managed by investment advisor (fund
structure)iv. Security offerings are restricted to accredited investors;
platforms password protectedv. Platforms do not make any recommendations to
potential investors – no solicitation except for website
54
I. What Has Changed?
vi. Neither the platform nor its officers, directors or employees receive compensation in connection with the purchase or sale of securitiesA. Advisor receives a promote (fund structure); Fixed
payment for issuer directB. The amount and terms of any compensation are
disclosed to investorsvii. Platform does not handle customer funds or securitiesviii.Neither the platform nor its associated persons are
subject to a statutory disqualification
55
I. What Has Changed?
e. What is the Basis for the No Action Letters?i. No solicitation?ii. No transaction based compensation?iii. Already regulated as a result of investment advisor status?iv. Where is the exemption in the law?v. Maybe SEC did not make a decision?
f. Some states do not agreeg. Issues for Real Estate
i. SEC only thought this would be used by venture capital fundsii. Promote issuesiii. Sponsor indicated they only received compensation for
managing the investments56
I. What Has Changed?
iv. Are these 506(b) or 506(c) offeringsA. Limitation on right to purchaseB. Long line of authority that has been changing as
marketing has changed.(1) SEC Release 33-7856(2) Lamp Technologies(3) IPO NET
57
I. What Has Changed?
3. All rules under Regulation D still applya. Advertising in a 506(c)b. No Advertising in 506(b)
58
I. What Has Changed?
4. Platforms advertise the websitea. Investors cannot see any of the offerings until they qualify
as am accredited investor.b. Since this is a 506(b) offering, investors can self-certify.
5. Citizen VCa. Require pre-existing substantive relationshipb. No define waiting period.
59
I. What Has Changed?
II. Broker-Dealer Considerations
1. Any person that engages in the business of effecting transactions in securities for the accounts of others must register as a broker-dealer
2. Issuers themselves do not have to register3. Rule 3a4-1 provides an exemption for persons who work for
the issuersa. Must comply with all of the following:
i. cannot be subject to a statutory disqualification;ii. cannot receive performance based compensation; andiii. is not an associated person of a broker or dealer.
60
II. Broker-Dealer Considerations (cont’d)
4. In addition to complying with all of (a) through (c) above, the person must also comply with one of the following:a. the security must be sold through a registered broker-
dealer (or other specified person);b. the person
i. primarily performs, or intends to perform, substantial duties for the issuer other than the sale of securities,
ii. is not, and has not for the prior 12 months, been an associated person of a broker-dealer, and
iii. does not participate in more than one offering every 12 months; or
61
II. Broker-Dealer Considerations (cont’d)
c. the associated person i. only prepares or delivers written communications through
the mail or means that does not include oral solicitation, ii. only responds to inquiries initiated by potential investors
which are limited to the contents of the offering material, oriii. only performs administrative work with respect to the
transactiond. SEC Recent Comments
i. Enforcement for failure to be licensed in absence of other circumstances
ii. Blass Speeche. State Broker-Dealer Rules
62
III. Regulation A
1. Eligible Issuers a. Issuers organized in and their principal place of business in the
United States and Canadab. Certain issuers are not eligible
i. Reporting companiesii. 40 Act companies
A. BDC’siii. Blank check companies
A. Blind pool allowediv. An entity issuing undivided interests in oil and gasv. Failure to file Regulation A reports during last 2 yearsvi. SEC registration revoked in the last 5 yearsvii. Certain bad actors
63
III. Regulation A (cont’d)
2. Eligible Securitiesa. Equity securities – including warrantsb. Debt securitiesc. Debt securities exchangeable into equity securities
i. Asset-backed securities are excluded
64
III. Regulation A (cont’d)
3. Offering Limitationa. Tier 1
i. Limited to $20 million in a 12-month periodb. Tier 2
i. Limited to $50 million in a 12-month periodc. Selling shareholders allowed to sell 30%
65
III. Regulation A (cont’d)
4. Investment Limitationsa. Accredited — No Limitsb. Non-accredited purchasers limited to 10% or greater of the
investor's annual income or net worthi. This limitation does not apply if the security is publicly
traded on a national securities exchange
66
III. Regulation A (cont’d)
5. Integration Rulesa. No integration with prior sales of securities b. No integration with subsequent sales of securities that are:
i. Registeredii. Issued under Rule 701iii. Employee Benefit Planiv. Regulation Sv. Under the crowdfunding rulesvi. Made no more than 6 months after the completion of the
Regulation A offeringc. You can do multiple offerings at the same time as long as they
comply with both rules
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III. Regulation A (cont’d)
6. Reporting Requirements – Tier IIa. Annual - Form I-Kb. Semi-annual - Form 1-SA c. Current reports - Form 1-Ud. Special financial reports - Form 1-Ke. Exit reports - Form 1-Z
7. Section 12(g)a. Tier II exempt if:
i. Complies with reporting requirements ii. Engages a transfer agentiii. Revenues of less than $50 million and public float of less than $75 million
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Event REGULATION A REGULATION DTiming Must be approved by the
SEC Anticipated to take 3-8 months to complete
Can complete an offering in several weeks
Cost Expensive process The cost of a Regulation D offering is probably 25% to 50% of what it will cost to complete a Regulation A offering or less
Limit on Securities
You are limited as to the type of security
There is no limit on the types of securities
IV. Regulation A Compared to Regulation D
69
Event REGULATION A REGULATION DIssuer Financial Information
Better for investors - Regulation A requires certain financial information to be provided
Better for sponsors - No requirement to provide any financial information
Reporting Better for investors - It requires certain reports to be provided
Better for sponsors - It has fewer reporting requirements
Type of Investors
Allows you to sell to accredited and certain non-accredited investors, provided non-accredited investors meet certain requirements
Generally only accredited investors - Can sell to certain non-accredited but most Regulation D offerings do not comply
IV. Regulation A Compared to Regulation D
70
Event REGULATION A REGULATION DType of Issuers
Limits who can be an issuer No limitation on the type of issuers
Offering Documents
There is a benefit in that there is a simplified form of offering documents; if you use S-1 or S-11 it is more complicated.
There is no form of offering memorandum, and if you only sell to accredited investors, there is no actual offering documents required (subject to 10(b)(5)
General Solicitation
Testing the water is permitted
506(b) not allowed506(c) allowed
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IV. Regulation A Compared to Regulation D
Event REGULATION A REGULATION DTransferability The shares are freely
transferrableSubject to finding appropriate securities exemptions
Reporting Company Rules
You can go over the 2,000 limitation and avoid becoming a reporting company as long as you do not exceed certain thresholds
If you only sell to accredited investors, you will probably have fewer investors and less likelihood of exceeding the 2,000 limitation
FINRA FINRA views a Regulation A offering similar to a public offering; as a result, broker-dealers have to meet all the public requirements
You have to submit a copy of the Regulation D offering to FINRA, but no approval requirements
72
IV. Regulation A Compared to Regulation D
Event REGULATION A REGULATION DIntegration Not integrated with any
prior offers and can have concurrent offerings
Integrated with other offerings
Issuer Liability
Issuer liability is better for the investor
Issuer liability is better for the issuer
Selling Shareholders
Allows shareholders to sell concurrently with the offering
Difficult to comply with securities law with selling shareholders
27004262973
IV. Regulation A Compared to Regulation D
► You may ask a question at anytime throughout the presentation today. Simply click on the question mark icon located on the floating tool bar on the bottom right side of your screen. Type your question in the box that
appears and click send.
► Questions will be answered in the order they are received.
Q&A:
July 14, 2016 74
SEGMENT 2:
Tore SteenCEO, Co-FounderCrowdStreet, Inc.
SEGMENT 3:
Darryl SteinhausePartnerDLA Piper
SEGMENT 1:
Rita W. GarryPartnerGolan & Christie LLP
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