Andrew Ledbetter

Andrew Ledbetter

I am a corporate and securities attorney in Seattle.  Over the years, I have represented numerous private companies, VC funds, placement agents, and others in venture transactions.  Today, much of my work involves capital markets transactions, public company SEC reporting, and related corporate and disclosure advice.  I have advised in dozens of initial public offerings, stock exchange listings, secondary offerings, public and private M&A deals, international transactions, PIPEs, spin-offs, going private transactions, and other transactions.

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The SEC has the Munchees: Eating away at the “utility token” theory

Yesterday, the SEC issued an enforcement order regarding Munchee’s token offering and SEC Chairman Jay Clayton released a general public statement on cryptocurrencies and ICOs.  For those who previously read our post about the SEC’s report in the DAO, much of this might not be a surprise – although the SEC staff did answer the call of discussing so-called “utility tokens.”

The SEC action against Munchee is notable to us because Munchee had at least some argument that its tokens had utility.…

SEC Report on Tokens as Securities: Seven Takeaways

One of the more interesting phenomena in early-stage investing is the recent emergence of initial coin offerings (“ICOs”), token generation events (“TGEs”), or similar distributed ledger or blockchain-enabled means for raising capital. Much has been written, including by many skilled lawyers in the technology sector, about whether the tokens issued in these structures involve “securities” – and, frankly, some of it is unhelpful. …

New SEC exemption rules for intrastate and regional offerings

Yesterday the SEC adopted rules intended to facilitate intrastate and regional securities offerings.  The SEC made general updates and modernized old Rule 147, the safe harbor exemption for intrastate securities offerings under Section 3(a)(11) of the Securities Act. The SEC also adopted a new exemption in Rule 147A, which differs from Rule 147 primarily in that it expressly permits general solicitation and does not require the issuer to be formed in the same state as its principal place of business and investors. …

“Qualified Client” Threshold Increasing to $2.1M

The SEC has updated the net worth threshold for “qualified clients” from $2.0 million to $2.1 million, effective August 15, 2016.

Section 205 of the Investment Advisers Act of 1940, as amended (the “Advisers Act”) generally prohibits a registered investment adviser from entering into an advisory contract that provides for compensation to the adviser on the basis of a share of capital gains upon or capital appreciation of funds of an advisory client. …

Data Breach Incidents – 16 DOs and DON’Ts

Data breaches are expensive. They cost an average of $5.4 million each to US companies in 2011 for mitigation and remediation alone, while also causing significant harm to brand and reputation.  The first 24 hours after you discover a breach are critical to restoring security, minimizing harm, obtaining and preserving evidence and complying with contractual and legal obligations. …

SEC Proposes Clawback Rules

The SEC has proposed rules requiring listed issuers to adopt and comply with written “clawback” policies. These policies would need to provide that, if a listed issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer with any financial reporting requirement under the securities laws, then the issuer will recover the amount of any incentive-based compensation erroneously awarded to an executive officer.…

SEC Proposes “Pay-Versus-Performance” Rules

Yesterday the SEC issued its long-awaited “pay-versus-performance” rule proposal. The rules would add a new paragraph (v) to Item 402 of Regulation S-K. In short, the proposed rules would require a new table comparing “executive compensation actually paid” to the “total shareholder return” (TSR) of the company and its peers, as well as a discussion of the relationship between these amounts.…

Carefully Draft NDAs to Avoid Whistleblower Concerns

In light of the SEC’s first enforcement action against a company for impeding whistleblower activity in violation of Rule 21F-17, employers may wish to consider clarifying in their agreements, policies and practices that involve confidentiality obligations that employees may provide truthful information to the SEC or other governmental agencies concerning potential violations of law.…

IMHO, Omnicare Doesn’t Materially Change Opinion Disclosure

Today, the U.S. Supreme Court issued its anticipated Omnicare decision, which addresses the standard of liability applied to expressions of opinion in a registration statement for a public offering. While there will be clamoring about Omnicare (it is somewhat rare for the Supreme Court to issue securities law decisions), in my opinion the case does not involve a fundamental shift in how disclosure is drafted, although it does invite a few drafting and diligence strategies.…

Recent SEC Interpretations Facilitate Intrastate Crowdfunding

The SEC has recently issued interpretations regarding Rule 147.  This rule provides a safe harbor under Section 3(a)(11) of the Securities Act of 1933, as amended, which exempts from federal registration securities offered and sold only to persons resident within a single state or territory, in which the issuer is also resident. …

SEC Provides Interpretations on Rule 506(c)

As we’ve previously blogged, in July 2013 the SEC adopted rules that permit general solicitation and general advertising in connection with certain offerings of securities to accredited investors.  Yesterday, to help the markets understand some common interpretative questions associated with these new rules, the SEC issued several new Compliance and Disclosure Interpretations. …

Recent Venture Capital Trends: CB Insights Q2 2013 Data

CB Insights has published summary data regarding recent venture capital trends, together with a full report available to paid subscribers.  In terms of investments by VCs, the report indicates that US$7.0B was invested in 807 deals in the second quarter of 2013, representing a small increase in dollars invested (versus US$6.9B in first quarter) but a decrease in the number of deals of approximately 4%. …

SEC Issues Rules Lifting Ban on General Solicitation in Unregistered Fundraising

Ban on General Solicitation Lifted with Respect to Accredited Investors

Today, the Securities and Exchange Commission (SEC) adopted new rules to lift the ban on general solicitation of funds or general advertising for certain private offerings of securities.  Once the rules become effective (60 days after publication in the Federal Register), provided that certain requirements are met, startups, fund managers and other companies will be able to utilize general advertising to offer to sell stock to “accredited investors” as defined in Rule 501 of Regulation D of the Securities Act of 1933 (typically wealthy individuals with liquid net worth in excess of $1 million or investment funds; see our discussion of the recently revised accredited investor standards here as well as information on the SEC’s site http://www.sec.gov/answers/accred.htm). …

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