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Equity Crowdfunding as Economic Development?
Get PDFThe so-called JOBS Act became law in 2012. Part of the JOBS Act was to make obtaining financial capital for the small businessperson or entrepreneur more easily available by making equity crowdfunding permissible under the securities laws and regulations promulgated thereunder. I have defined crowdfunding and its different flavors in several prior publications and will not repeat that exercise here. Although the United States Securities and Exchange Commission (SEC) has promulgated regulations regarding some portions of the JOBS Act, and some outsiders believe the SEC\u27s move to clarify rule A+ offerings in 2015 was a positive. This Article, however, reiterates that, until full implementation of the JOBS Act\u27s necessary regulatory environment occurs, penalties will continue to accrue to start-up enterprises, individual investors, and potential employees facing rigged employment numbers that negate those individuals who have simply stopped their respective job searches because of the economic environment
After Goeller v. United States, Can the Theft Loss Treatment Now Be Applied to Investments When Corporate Deception Is Present?
Get PDFTraditionally, the theft loss deduction for Federal income tax was limited in several ways. The limitations included requiring that the theft be considered a theft under the state law in which the theft occurred and that there be direct privity between the person committing the theft and the person against whom the theft occurred. The restrictions have made it hard to use the theft loss deduction in most securities fraud cases. This Article examines the history of the theft loss deduction and recent changes that may show a relaxing of some of these restrictions, and how these changes may impact allowing for the theft loss deduction in securities fraud cases
Putting North Carolina Through the PACES: Bringing Intrastate Crowdfunding to North Carolina Through the NC PACES Act
Get PDFThe nationwide increase in the number of small businesses over the past several years has led to more small businesses, startups, and entrepreneurs seeking capital investments from the general public in order to build and grow their businesses. In an effort to attract investors, businesses have taken an interest in securities crowdfunding, a method for raising capital whereby businesses offer stock in their companies in exchange for capital from investors. While an offering of securities generally must be registered with the United States Securities and Exchange Commission, companies can circumvent the registration requirement by utilizing one of the available exemptions provided by federal statute. This Comment focuses primarily on the intrastate exemption, which allows businesses to sell securities if the offering is wholly contained within a single state, but only if that state has given businesses the option to use that exemption. Since 2011, over half of the states have passed legislation permitting businesses within those states to take advantage of the intrastate exemption. North Carolina, through the NC PACES Act, is considering passing such legislation, yet that bill has been stalled in the North Carolina General Assembly since April of 2015. This Comment highlights the benefits that North Carolina can enjoy by allowing intrastate securities crowdfunding and ultimately calls for the General Assembly to pass the NC PACES Act
Viewing the Supreme Court\u27s Exactions Cases Through the Prism of Anti-Evasion
Get PDFThis Article considers the U.S. Supreme Court\u27s 2013 decision in Koontz v. St. Johns River Water Management District, which extended the application of the Court\u27s framework for evaluating the constitutionality of land use exactions (known as the Nollan/Dolan test). The majority of the Court relied heavily on the unconstitutional conditions doctrine, explaining that this doctrine formed the basis not only for the Nollan/Dolan framework but also for the extension of that framework to Koontz\u27s new factual setting. Four members of the Court dissented. Although the dissenting justices seemingly agreed with several of the majority\u27s propositions, they vigorously opposed the manner in which the majority applied those propositions.
Although Koontz might be viewed as just another in a long line of cases that make up the messy jurisprudence of regulatory takings and unconstitutional conditions, the primary thesis of this Article is that Koontz in fact provides a key to unlocking the Court\u27s exactions framework. Relying on my prior work with Brannon Denning, this Article posits that both regulatory takings and the doctrine of unconstitutional conditions constitute anti-evasion doctrines by which the Court seeks to fill enforcement gaps left open by its prior constitutional decision rules. Inasmuch as land use exactions lie at the intersection of these two doctrinal areas, one would expect to find that anti-evasion notions play a large role in the Court\u27s exactions decisions. And indeed, both the majority and the dissent in Koontz invoked the anti-evasion characteristics of the Nollan/Dolan test in support of their analytical positions in that case.
Viewing Koontz (and its jurisprudential antecedents) through the prism of anti-evasion helps both to explain the majority\u27s decision in that case and to bring the differences between the majority and dissent into sharper focus. Additionally, the anti-evasion concept suggests some guidelines for how future exactions issues might be resolved both at the micro level (dealing with future decision rules that will have to be developed in light of Koontz) and at the macro level (addressing larger questions about the Court\u27s takings jurisprudence and the place of the exactions cases within it)
Thirty-Eighth Annual Hooding and Graduation Ceremony (2016)
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Strict in the Wrong Places: State Crowdfunding Exemptions\u27 Failure to Effectively Balance Investor Protection and Capital Raising
Get PDFIn 2012, Congress passed the Jumpstart Our Business Startups Act, which created an exemption from securities registration for crowdfunded capital raises. Although it was not until May of 2016 that the Securities and Exchange Commission\u27s rules implementing this exemption took effect, many states used the interim period to enact crowdfunding exemptions of their own.
Although most of these exemptions aim to increase small businesses\u27 access to capital while still providing adequate investor protection, the exemptions differ greatly in their individual applications. Consequently, a comparison of these exemptions provides a useful analysis of effective regulation in an area of the law new to all players. This Article provides a survey of several state crowdfunding exemptions, focusing on critical characteristics that affect the success of the offering. This Article argues that many of the existing state exemptions fail to effectively help companies raise capital or protect investors against fraud, but instead are overly restrictive in their financial restraints while being too lenient in their investor protection measures. It then suggests a state exemption framework intended to better serve the companies and investors utilizing crowdfunding exemptions
Challenges to Crowdfunding Offering Disclosures: What Grade Will Your Offering Disclosure Get?
Get PDFCrowdfunding is a term used in many different contexts. The conversation surrounding crowdfunding encompasses diverse considerations and interests. In its broadest sense, crowdfunding is a technological fundraising medium for businesses, projects, or charitable causes. Instead of dealing with a financial institution or specific angel investors or venture capital funds, crowdfunded start-ups try to raise money from a worldwide crowd. Some crowdfunding campaigns solicit donations and pre-orders, such as Kickstarter or Gofundme. Others sell securities. This Comment will only address the rules that apply to crowdfunding campaigns which offer securities.
Securities laws have two prime directives. First, companies can only offer and sell securities in a registered offering or in an offering that satisfies the requirements of an exemption from registration. Second, these businesses must not misstate material facts or omit material facts if the omission would make its other disclosures misleading to investors.
Primarily, the JOBS Act and other crowdfunding laws focus on the first prime directive. They create exemptions from registration that allow businesses to crowdfund, utilize general solicitation and, in some cases, offer and sell securities to non-accredited investors. These new exemptions present exciting and important changes that democratize the capital raising process by allowing new subsets of businesses to communicate with a broader investor base than ever before.
This Comment will briefly discuss these updated exemptions with a particular focus on Title II of the JOBS Act and the related SEC Rule 506(c), as well as Title IV of the JOBS Act and what some call Regulation A+. Both Rule 506 (c) and Regulation A+ are revolutionary because they change who may talk to investors and the technologies that may be used to reach them. The primary focus of this Comment is to discuss these securities laws\u27 requirements for disclosures to investors in light of the brave new world crowdfunding offers. On their face, the updated exemptions change very little about what issuers must say to investors. The disclosure challenges posed by the updated exemptions affect new issuers who have little prior disclosure experience and may have very low compliance budgets. These challenges require such new issuers to comply with traditional securities disclosure rules when they are talking to a less sophisticated crowd of investors than ever before utilizing new technological platforms that are constantly evolving. This Comment discusses how and why an issuer taking advantage of these updated exemptions might inadvertently violate securities disclosure laws when the speaker changes, the audience changes, or the disclosure platform changes, and how to avoid potential traps these changes create when paired with newly available disclosure platforms
The FMA and the Constitutional Validity of Magistrate Judges’ Authority to Accept Felony Guilty Pleas
Get PDFGiven the burdens of a growing district court caseload and the fact that over 97% of criminal convictions result in guilty pleas, efficiency has necessitated an expanding role for magistrate judges. Within that expanded role lies a greater need for delegation to magistrate judges to assist in the practice of guilty plea acceptance. The Federal Magistrates Act (FMA) permits magistrate judges to take on additional duties so long as they are “not inconsistent with the Constitution and laws of the United States.” Despite the language of the FMA, the Seventh Circuit has been the first circuit to deny district courts the option to delegate the acceptance of plea agreements to magistrates. Therefore, the key question on which this Comment focuses is whether the FMA permits magistrate judges to personally accept guilty pleas. This Comment answers this question through an analysis of the history of the FMA, the relevant case law, as well as a comparative discussion between the Seventh Circuit and its sister circuits. Ultimately, this Comment proposes that the FMA should be read to permit federal magistrates the power to accept guilty pleas, consistent with the jurisprudence of the several circuits and the Constitution