, investment companies or funds are defined as companies that are primarily in the business of investing and trading securities. The US Securities Act of 1933, and applicable case law, generally defines securities as any note, are defined as any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest, investment contract, or participation in any profit-sharing agreement. In other words, whenever investors or members of a company are not actively engaged in running the company but instead have only passively invested in the company through the purchase of a share, stock, or
Continue Reading Investment Companies and the SEC

Debt-based crowdfunding, often referred to as peer-to-peer lending (P2P), is a great way to raise money for small businesses that may find it more difficult to obtain loans from traditional lending institutions. Also, small business loans often take much longer to get funded than the average debt-based crowdfunding loan, which makes debt-based crowdfunding a suitable funding option for businesses that need funding relatively quickly. According to P2PMarketData, this crowdfunding model has proven to raise the largest amount of capital on various platforms.Businesses utilizing debt-based crowdfunding raise capital by taking micro-loans from hundreds of lenders who are also called investors.

Continue Reading The Risks and Rewards of Debt-Based Crowdfunding companies in the cannabis industry seeking to raise capital, legal compliance is particularly important. Not only is this a highly regulated industry but offers and sales of securities of companies within the industry are generally subject to enhanced scrutiny by State and federal securities regulators.

It appears that the Securities Exchange Commission (SEC) is increasing its scrutiny of the financial reporting and disclosure requirements of cannabis businesses in connection with the offer and sale of securities.

In September of 2018, the SEC issued an “Investor Alert” pointing to increased fraud in early-stage capital raise cannabis offering space. The
Continue Reading Raising Capital for Cannabis and Cannabis-related Businesses her book, Collective Courage: A History of African American Cooperative Economic Thought and Practice, Jessica Gordon Nemhard states that the principles of African American cooperatives are solidarity, equity, democracy, and sustainability. These principles were accomplished by working together to fight racism through the pooling of resources. Jessica Gordon Nemhard highlights this history in Collective Courage: A History of African American Cooperative Economic Thought and Practice. Professor Gordon Nemhard writes about how African Americans worked together to improve each others’ lives through co-op economics.

In the late 18th century, the first cooperative efforts were established in the form of
Continue Reading The History of African American Cooperatives and the Importance of Representative Legal Support the pandemic, small businesses accounted for nearly half of all private-sector jobs and two-thirds of net new jobs created from 2000 to 2017. According to McKinsey & Co., the 1.1 million minority-owned small businesses with employees in America are an essential job source, employing more than 8.7 million workers and annually generating more than $1 trillion in economic output. Women own nearly 300,000 of them, employing 2.4 million workers. Small businesses experienced disproportionate job losses during the pandemic, but the pain was even more significant for women of color.

The most vulnerable small businesses face both financial and
Continue Reading COVID-19's Impact on Black and Latinx Women-Owned Businesses

By Elizabeth L. Carter, Esq.

As we celebrate Black Business Month and Black Philanthropy Month throughout August, many Black entrepreneurs are being robbed of their dreams and livelihoods because they are finding much difficulty in getting the funding that they need to sustain their business. Without sufficient capital to fully launch and grow their businesses, these Black entrepreneurs will not be able to create thriving enterprises that could financially support their families while also building their communities.

The struggle to get funding as a Black business owner has little, if anything, to do with merit or skill. It’s also not
Continue Reading Why I Started a Legal Fund to Support Black Businesses Raising Capital data privacy laws have ties with the European Union (“EU”). As we mentioned in our last blog, with the rise of social media and e-commerce there is a heightened focus on data privacy. Users around the world are providing their personal data such as credit card numbers, real names, postal addresses, social security numbers, demographics, income, browsing history and search history, and age, in order to access, purchase, and communicate online. The U.S. has only recently begun to create data privacy laws, all of which vary by State. Currently, only California and Virginia have legislation signed into law
Continue Reading Part 2: The Intersection between U.S. Data Privacy & Securities Laws (European Union Roots) this new digital age that we are living in, it is no surprise that users are providing their personal data in order to access social media platforms, sign up for online mailing lists, purchase streaming subscriptions, shop online, invest, raise capital, and more. But at what cost? In order to access seemingly free platforms, users are required to share their personal information such as first and last name, address, and credit card number. Data privacy laws aim to protect this very information. Companies have been collecting, sharing, and selling your data without much regulation, until now. Recently, TikTok
Continue Reading PART 1: Investing & Raising Capital Online: But, At What Cost? fraud is a serious act that can apply to any company, no matter how large or small. This is why it is important that businesses interested in raising capital ensure legal compliance with required securities disclosures prior to making an offer to investors. What is securities fraud exactly? The Securities and Exchange Act of 1934 (the “1934 Act”) defines fraud and misrepresentation in securities as “any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.” For example, knowingly making false statements, misleading investors, and omitting material information, such
Continue Reading Securities Fraud and Misrepresentation: Failure to Properly Disclose Material Risks Jumpstart Our Business Startups Act (the “JOBS Act”), enacted on April 5, 2012, established a regulatory structure for startups and small businesses to raise capital through securities offerings through ,crowdfunding. On October 30, 2015, the SEC adopted the rules to implement Title III of the JOBS Act (“Title III ”). Title III added Section 4(a)(6), to the Securities Act of 1933 for certain crowdfunding transactions (“Regulation Crowdfunding or Reg CF”).

Some Diversity Aspects of Reg CF?

Reg CF is an exemption from the registration requirements in Section 12(g) of the Security Exchange Act of 1934, which was
Continue Reading Diversity within Regulation Crowdfunding is an Investment Company?

The Investment Company Act of 1940 (“ Act”) defines an “investment company” as an ,Issuer that “holds itself out as being engaged primarily or proposes to engage primarily, in the business of investing, reinvesting or trading securities.” In other words, an investment company is a fund or business that invests in other businesses. Even if a company depicts itself as operating businesses rather than primarily passively investing in other businesses, the company may still come within the Act’s coverage.

The Act requires investment companies, funds, or businesses that invest in other businesses, to register
Continue Reading Is Your Fund Exempt under the Investment Company Act of 1940? The Investment Advisers Act of 1940 (“Act”) is a U.S. federal law that was primarily intended to regulate the business of rendering personalized investment advice to individuals and businesses.. Personalized investment advice is individualized advice attuned to a particular client’s needs. It does not include generalized information or information that generally circulates to the public. After the stock market crash of 1929 and the depression of the 1930s, the Act was designed to eliminate certain abuses in the securities industry that were found to have contributed to these events. This included holding Investment Advisers accountable if they provided fraudulent
Continue Reading Does the Investment Advisors Act apply to my business? The debate on whether cryptocurrencies are considered securities is still ongoing. Being that this is a more than $1.6 trillion dollar industry, of course the Securities and Exchange Commission (“SEC”) has an interest in protecting users and investors alike. Similar to most discussions surrounding what is and what is not a security, the answer is not as straightforward as one would like.
A cryptocurrency (“crypto”) is a digital form of currency that people can use to buy goods or services. There are more than 6,700 cryptocurrencies that are publicly traded. Interestingly, senior SEC officials have made statements concluding that
Continue Reading Are Cryptocurrencies Securities? 3(a)11 Exemption

Section 3(a)(11) of the Securities Act is generally known as the “intrastate offering exemption.” This federal exemption seeks to facilitate the financing of local business operations. Section 3(a)(11) concerns State-specific securities that meet certain exemption requirements. In order to qualify for the intrastate offering exemption at the federal level, a business must: (1) be organized in the State where it is offering the securities, (2) carry out a significant amount of its business in that State and, (3) make offers and sales only to residents of that State.

The Section 3(a)(11) intrastate offering exemption does not
Continue Reading Federal Intrastate Exemptions under Securities Act of 1933

Right now, non-fungible tokens (NFT) are all the buzz in the cryptocurrency and securities law space. People all over are trying to figure out what is an NFT. Specifically, people want to know how it is used and traded, whether it is something that will be affected by securities regulations, and whether there are any other legal considerations. There can not be a discussion about NFTs without mentioning Beeple’s recent sale. On March 11th, Beeple—a digital artist from North Carolina—sold an NFT for an astonishing $69.3 million dollars. His piece titled “Everydays: The First 5000 Days” is a collage of
Continue Reading The Intersection Between NFTs, Cryptocurrencies, and Securities

Under the federal securities laws a company may not offer or sell securities unless the offering has been registered with the SEC or an exemption from registration is available. A securities offering exempt from registration with the SEC is sometimes referred to as a private placement or an unregistered offering. Exempt private placements are done in reliance upon Sections 3(b) or 4(2) of the 1933 Act as constructed or under Regulation D as promulgated by the SEC, or both. Section 4(a)(2) of the Securities Act, sometimes referred to as the “private placement” exemption, exempts from registration transactions by an issuer
Continue Reading Introduction to Private Placements : Regulation D