On April 23, 2024, the Federal Trade Commission issued a final rule that would prohibit restrictive covenants (non-compete agreements) for most employees, effective on September 4, 2024. Last Monday, I was about to write a blog post predicting that FTC’s rule couldn’t survive. A Supreme Court that struck down major environmental rules, eliminated the 40-year-old Chevron doctrine, and created from scratch a shocking new doctrine of presidential immunity that has Washington, Jefferson, Hamilton, et al rolling in their graves, all in one week, was not going to tolerate a national rule opposed by ..read more

Last week, in a 6-3 opinion, the U.S. Supreme Court held that the SEC must use the regular federal court system, not its internal administrative proceedings, in an antifraud suit against an investment adviser seeking civil damages. The Court ruled that litigating the case through the SEC’s internal proceedings violated the defendants right to a jury trial under the Seventh Amendment of the U.S. Constitution. The case throws into question all pending SEC administrative proceedings. Like most Supreme Court decisions, the opinion in SEC v. Jarkesy leaves important questions open. What about proce ..read more

In this blog post from long ago, I wondered whether a company raising money through Regulation A could legally sell directly to investors. On one hand, the law in a handful of states require all sales to be through broker-dealers. On the other hand, those state laws might be invalid under section 18(b) of the Securities Act of 1933. It looks as if common sense and the market are answering the question without litigation. Late last year, Florida changed its laws to allow direct sales. Florida is a big state with lots of investors, so that’s a big deal. What we once referred to as four “problems ..read more

The House of Representatives just passed not one, not two, but three different bills that would expand the definition of “accredited investor.” Does this mean the definition will change? No. The three proposed changes are: Include in the definition of accredited investor anyone who says he or she understands the risks, using a form of not more than two pages issued by the SEC. This would effectively eliminate the concept of accredited investor. Include in the definition of accredited investor anyone who has received personalized advice from a person who has himself or herself become an accred ..read more

Form C is the disclosure document used in Reg CF. Because I see so many Form Cs that aren’t done properly, I thought it would be worthwhile to explain how a Form C should be drafted and why too many lawyers go astray. Rule 201 (17 CFR §227.201) tells us exactly what should be disclosed in a Form C: Rule 201(a) calls for the name, legal status, physical address, and website of the issuer. Rule 201(b) calls for the names and business experience of officers and directors.  Rule 201(c) calls for the name of each person owning 20% or more of the voting stock. All the way through Rule 201(z ..read more

I spend lots of time talking about special purpose vehicles (SPVs) and the Investment Company Act of 1940. Now we have a real-world example. Anthropic was founded by Dario Amodei, who wrote the basic artificial intelligence model for OpenAI before leaving to start his own company. Once ChatGPT launched Anthropic has had no trouble raising money. They’ve raised $7.5 billion and counting in the last year. In my humble opinion, the amount of money being thrown at Anthropic is insane. Most obviously, it demonstrates the psychological power of The Fear of Missing Out. More subtly, it represents the ..read more

It’s a trick question. It’s a trick question because the term “blind pool offering” doesn’t appear in Reg CF. If you try to figure out whether Reg CF allows “blind pool offerings” you’ll drive yourself crazy and/or reach the wrong answer.  To illustrate the point, suppose NewCo was formed to buy Class B multi-family projects in the southeastern United States but has not yet identified any such properties. If you focus on the term “blind pool offering” you might decide that NewCo can’t use Reg CF. But if you read Reg CF instead, you’ll reach the opposite – and correct – conclusion.  T ..read more

Beginning on January 1, 2024, new and existing companies, with some exceptions, must disclose their owners to the US Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”). This is big news in the legal world, not just for Crowdfunding but for everyone. The following summary was prepared by Chimuanya Osuoha. If you’re a client of our firm you’ve probably dealt with Chimuanya and know her to be an extremely capable young lawyer. The Corporate Transparency Act  General Rule Beginning January 1, 2024, all entities that are either formed or registered to do business in the ..read more

Like everyone else, I was shocked by the launch of ChatGPT. And like everyone else, I believed lawyers would be first on the chopping block. But I now have a far more optimistic view. I think AI will have a far more nuanced and ultimately beneficial effect for lawyers and their clients, including but not limited to Crowdfunding clients. At first, I thought lawyers (or non-lawyers, gasp!) could type a question into ChatGPT and get a fully-formed legal product, whether a brief, a memo, a contract, or an obnoxious letter. But it turned out that neither ChatGPT nor its imitators is close to that ..read more

My 10th-great grandfather was William Bradford, the leader of the Pilgrims. I’m grateful that he and his band of religious refugees made the trip and were saved from starvation by the native population. I’m grateful for the wisdom of the American people and the resilience of their institutions. I’m thankful for a culture that rewards risk-taking and innovation and that is slowly, haltingly, inexorably freeing itself of the prejudices of our collective past. I’m grateful for American entrepreneurs who endlessly question the present and invent the future. I’m grateful I declined an invitation t ..read more