Securities Law: An Overview

SECURITIES LAW: AN OVERVIEWSECURITIES LAW 2016 SERIES

Premier date: March 11, 2016

securities law 2016 series

securities law: an overviewPremier Date: MARCH 11, 2016

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 2

WE WOULD LIKE TO TAKE THIS OPPORTUNITY TO THANK OUR SPONSORS

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 3

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™

meet the facultyPANELISTS

MODERATOR Vanessa Schoenthaler,

Sugar Felsenthal Grais & Hammer LLP

Craig S. Mordock Sheppard, Mullin, Richter & Hampton LLPAlissa Altongy Parisi

K&L Gates LLP

Julia Vax Arnold & Porter LLP

4


Practical and entertaining education for business owners and executives, accredited

investors, and their legal and financial advisors. For more information, visit

www.financialpoise.comDISCLAIMER: THE MATERIAL IN THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY. IT SHOULD

NOT BE CONSIDERED LEGAL ADVICE. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.

5

http://www.financialpoise.com/


about this webinarStocks and bond are easily recognizable as securities, but did you know that promissory notes are also securities? As are certain joint venture interests and many other types of investment contracts. How do you identify a security? What are some of the requirements related to offering and selling securities? How do they differ between private and public companies? What happens if you fail to comply with securities laws? How has the JOBS Act, the FAST Act and other recent legislation changed the way in which companies offer and sell their securities?

In this webinar our expert panel will provide you with a high-level overview of the federal securities laws as well as tangible examples and practical advice in answer to these and many more questions.

6


about this seriesThe federal securities laws, made up of a complex assortment of statutes, rules, regulations and judicial precedent, play a ubiquitous role throughout a company’s life-cycle, relevant from the first issuance of founder’s shares at organization, to the use of equity compensation to reward and incentivize directors, employees and consultants, to private offerings of equity and debt in corporate finance transactions, to initial public offerings, alternative public offerings, in mergers and acquisitions and beyond.Please join our panel of leading securities law experts as they discuss—in plain English accessible to the non-expert—both fundamentals of the federal securities laws and the latest developments in this ever-evolving area of law.

As with all Financial Poise webinars, each episode in the series is designed to be viewed independently of the other episodes, and listeners will enhance their knowledge of this area whether they attend one, some, or all of the programs. 7


episodes in this series

Dates above are premier dates All webinars also available On Demand through West LegalEd Center and Vimeo

EPISODE #1 Securities Law: An Overview 3/11/16

EPISODE #2 Private Offering Exemptions and Private

Placements

4/15/16

EPISODE #3 Advanced Topics: Public Company

Reporting

5/20/16

8


What is a Security

The definition of a “security” includes obvious things like

“stocks” and “bonds”.9


But it also includes some not so obvious things that may require analysis and interpretation like “evidence of indebtedness” and

“investment contracts”.

What is a Security

10


Federal and state laws, rules, regulations and common law.

The first federal securities laws were enacted following the 1929 stock

market crash.

Which Laws Govern the Offer and Sale of Securities?

11


The Securities Act regulates offers and sales of securities, generally requiring all securities either be

registered or exempt from registration before being offered

and sold.


12


The Exchange Act created the SEC and regulates an issuer’s

information disclosure requirements, as well as things like securities

exchanges, trading platforms and intermediaries like broker-dealers.


13


The SEC is the agency primarily responsible for administering the federal

securities laws.The SEC has an Enforcement Division

responsible for prosecuting civil violations of the federal securities laws.

Who is Responsible for Administering and Enforcing the Securities Laws?

14


The DOJ US Attorneys Office is responsible for prosecuting criminal

violations of the federal securities laws.Each state also has a regulatory body

responsible for administrating and enforcing that state’s securities laws.

Who is Responsible for Administering and Enforcing the Securities Laws?

15


What Does the Registration Process Entail?

The most commonly-known registration process is probably the initial public offering (IPO),

although there are many different types of registration requirements.

16


●Registering securities for sale in an IPO entails: ● Preparing a registration statement and filing

it with the SEC. ● Undergoing a comment and review process. ● Simultaneously applying for an exchange listing.


17


Once an IPO registration statement has been declared effective by the SEC there are ongoing disclosure and reporting requirements under the

Exchange Act.


18


What Are Some of the Available Exemptions from Registration?

Most federal exemptions from registration requirements fall into two categories:

●Exempt securities;or

●Exempt Transactions.

19



State-level registration requirements may apply, unless preempted by federal law:

● NSMIA – National Markets Securities Improvement Act – preempts state law for many, but not all, federally-exempt transactions.

● Watch out for state (“blue sky”) requirements in private placements not covered by NSMIA.

● State anti-fraud statutes and notice requirements still applicable, despite preemption.

20



Federal Exemptions - Common Exempt SecuritiesGovernment and bank securities – Section 3(a)(2)

Commercial paper – Section 3(a)(3)Securities issued in bankruptcy – Section 3(a)(7)

Securities issued in exchange with existing security holders – Section 3(a)(9)Securities issued pursuant to a fairness hearing - Section 3(a)(10)

Securities offered and sold to persons within a single state – Section 3(a)(11)

21



Federal Exemptions - Common Exempt Transactions●Transactions by an issuer not involving a public offering:

● Section 4(a)(2) (and related Regulation D or Regulation S safe harbors)

● Rule 701 - employee/service provider equity incentive grants

22



Federal Exemptions - Common Exempt Transactions (cont.)●Transactions by persons other than an issuer, underwriter or dealer:

● Section 4(a)(1)● Rule 144● Rule 144A● Section 4(a)(7) – FAST Act

23


What Are Some of the Consequences of Failing to Comply with the Securities Laws?

Failure to comply with the securities laws may give rise to civil and criminal liability.

24



In the case of civil liability the SEC, state securities regulators and even individual investors can bring an action against a

company or its principals for things like fraud or inadequate or misleading disclosure.

25



The SEC can also bring enforcement actions for things

like insider trading (even if you’re a private company).

26



In the case of criminal liability at the federal level the SEC will refer matters to the DOJ for investigation and prosecution, while on the

state level the state Attorney General’s Office will handle criminal matters.

27


How have the JOBS Act and FAST Act Changed the Securities Laws?

Section 4(a)(7)General Solicitation

Regulation A+Crowdfunding

28


How to Resale and Secondary Markets Operate?

Private resale exemptions:Rule 144

Rule 144ASection 4(a)(1 ½)

Section 4(a)(7)29


How to Resale and Secondary Markets Operate?

Secondary market sales:Examples for registered securities:

Nasdaq or NYSE.Examples for unregistered securities:

SharesPost, EquityZen, Equidate.30


More About The Faculty: D

CRAIG S. [email protected]

Craig S. Mordock is a Partner at Sheppard Mullin, where he maintains a corporate and securities practice, with special emphasis on private and public securities offerings, corporate governance, and mergers and acquisitions. His corporate finance experience ranges from representing venture capitalists, institutional investors, and start-up companies in early-stage financings to representing issuers and investment banks in public offerings of equity and debt securities. He advises purchasers and sellers of companies in a variety of industries, including software, communications, semiconductors, life sciences, renewable energy, consumer products, and financial services.Craig has extensive experience representing public companies in connection with disclosure and compliance matters under federal securities laws and provides general corporate and business counseling to several privately held companies. He regularly counsels boards of directors and board committees in connection with their duties under state and federal law as well as their compliance with the rules of self-regulatory organizations such as the New York Stock Exchange and NASDAQ.Craig has been a speaker at numerous conferences on securities and corporate governance matters and has published articles on various topics in these areas. He is an active member of the business and legal community and has served on the board of directors of several local non-profit organizations.

31

mailto:[email protected]



ALISSA ALTONGY [email protected]

Alissa Altongy Parisi is a partner in the firm’s Corporate/M&A practice group and resides in the Washington, DC office. Ms. Parisi advises clients on a full range of corporate, securities, governance and compliance matters. Ms. Parisi has significant experience in advising boards and executive management on complex business and operational matters, including in the areas of risk assessment, implementation of governance initiatives and alignment of corporate strategy to achieve corporate goals. She also acts as corporate counsel for companies, advising on a host of general corporate matters, including fiduciary duties, management transitions, relationships with shareholders and effective approaches to the changing regulatory environment.Ms. Parisi advises companies on compliance matters relating to the SEC, NYSE, Nasdaq, state regulators and other authorities. Her compliance experience includes preparing SEC reports, advising with respect to the timing and substance of disclosure of material events and counseling with respect to shareholder meetings.Ms. Parisi also represents publicly and privately held entities in merger and acquisition transactions. She has broad experience in representing clients in the structure, negotiation, diligence and documentation of transactions ranging from several million dollars to several billion dollars.

32




JULIA [email protected]

Julia Vax, a Partner at Arnold & Porter LLP, in the Corporate and Securities practice, focuses her practice on business, corporate, and securities law. Her clients include emerging growth and public companies primarily in the life sciences and technology sectors. Ms. Vax has represented life sciences and technology companies at all stages of development, from entrepreneurs to publicly traded entities. She has advised clients in the biopharmaceutical, genomics, medical device, diagnostics, Internet and digital media, software, IP telephony, telecommunications and financial services sectors in all aspects of their corporate development and in connection with a broad range of financing and strategic transactions.Ms. Vax has extensive experience in IPOs, 144A debt transactions, shelf registrations, private placements, including PIPE transactions and venture capital financings, as well as in executive compensation, corporate governance and SEC reporting and compliance for public companies. She has been involved in numerous public and private financing transactions representing companies, investors, underwriters and placement agents. 33




VANESSA J. [email protected]

Vanessa J. Schoenthaler is a partner in the New York office of Sugar Felsenthal Grais & Hammer. Her practice focuses on corporate and securities matters with an emphasis on private and public securities transactions, compliance and disclosure obligations and corporate governance matters. Vanessa counsels foreign and domestic issuers, intermediaries and investors with respect to securities and regulatory compliance, corporate governance, corporate financing transactions, complex business transactions and general day-to-day corporate matters. She also advises sponsors and private funds with regard to formation and operation, investment advisor registration, compliance and disclosure obligations and investment transactions.

Ms. Schoenthaler speaks on and regularly authors or contributes to a number of articles related to current securities law and regulatory matters.

34


BMC Group’s SmartRoom™ is an award-winning virtual data room to manage M&A due diligence, financial transactions, and legal documents, and for sharing confidential corporate information in an ultra-secure online workspace. The solution offers simple, intuitive navigation with greater support at a lower cost.

Visit www.bmcgroup.com35

http://www.bmcgroup.com/

Visit www.eisneramper.comEisnerAmper. Let's Get Down to Business®

EisnerAmper LLP is a leading full-service advisory and accounting firm, and is among the largest in the United States. We provide audit, accounting, and tax services, as well as corporate finance, internal audit and risk management, litigation services, consulting, private business services, employee

benefit plan audits, forensic accounting, and other professional advisory services to a broad range of clients across many industries. We work with high net worth individuals, family offices, closely held businesses, start-ups, middle market and Fortune 500 companies. EisnerAmper is PCAOB-registered and provides services to more than 200 public companies and to thousands of entities spanning the hedge, private equity, brokerage and insurance

space in the financial services marketplace. As companies grow we help them reach their goals every step of the way. With offices in New York (NY), New Jersey (NJ), Pennsylvania (PA), California (CA), and the Cayman Islands, and as an independent member of Allinial

Global, EisnerAmper serves clients worldwide.

36

http://www.eisneramper.com/


www.financialpoisewebinars.com 37

http://www.financialpoisewebinars.com/


50,000 +Weekly

newslettersubscribers

15,000 +website Visitors

per month

10,000 +webinar

attendees per year

business owners & executives

Attorneys Accountants Bankers Business brokers Consultants Commercial lenders debt traders Developers Entrepreneurs

high net worth investors

38


http://www.accreditedinvestormarkets.com/

http://commercialbankruptcyalternatives.com/

http://commercialbankruptcyinvestor.com/

http://commercialbankruptcylitigation.com/

http://www.businesstransitionandexitplanning.com/

http://www.chamberwise.org/

http://www.dailydac.com/


50,000+ WEEKLY NEWSLETTER SUBSCRIBERS15,000+ MONTHLY WEBSITE VISITORS10,000+ YEARLY WEBINAR ATTENDEES

PODCASTS, E-BOOKS AND MORE

educating various constituents

about risks & rewards involving financially

distressed businesses

educating investors

about optionsbeyond

publicly traded securities

educating business owners

& executives

39


http://www.dailydac.com/

http://commercialbankruptcylitigation.com/

http://commercialbankruptcyalternatives.com/

http://www.commercialbankruptcyinvestor.com/

http://www.businesstransitionandexitplanning.com/



http://www.aimkts.com/




About Financial Poise™ DailyDAC, LLC, d/b/a Financial Poise™ provides continuing education to business owners and executives, investors, and their respective trusted

advisors. Its websites, webinars, and books provide Plain English, sometimes entertaining, explanations about legal, financial, and other

subjects of interest to these audiences.

40


The ChamberWise™ Education Consortium is a resource for Chambers of Commerce to provide its members with valuable

member benefits by offering relevant business education webinars; and generate revenue for the Chamber as well.

www.chamberwise.org41



Important Notes

• THE MATERIAL IN THIS PRESENTATION IS FOR GENERAL EDUCATIONAL PURPOSES ONLY.

• IT SHOULD NOT BE CONSIDERED LEGAL, INVESTMENT, FINANCIAL, OR ANY OTHER TYPE OF ADVICE ON WHICH YOU SHOULD RELY.

• YOU SHOULD CONSULT WITH AN APPROPRIATE PROFESSIONAL ADVISOR TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.

42