April 2015
From the Colorado Bar Association
Business Law Section

Ed Naylor, Editor
In this issue...
Regulation A+: Good, But Not Everything We Hoped For
By Victoria B. Bantz, Burns Figa & Will, P.C. © April 2015 All Rights Reserved

Under Section 401 of the Jumpstart Our Business Startups Act (the “JOBS Act”), enacted on April 15, 2012, the Securities and Exchange Commission (the “SEC”) was tasked with adopting rules governing the expansion of Regulation A. On March 25, 2015, the SEC adopted final rules amending Regulation A under Section 3(b) of the Securities Act of 1933 (the “1933 Act”) which create two new tiers of securities offerings: Tier 1 for offerings of securities by issuers of up to $20 million and Tier 2 for offerings up to $50 million. In addition, the final rules clarify issuer eligibility to use Regulation A, contents of offering circulars, testing the waters, and “bad actor” disqualification. The final rules will be effective June 19, 2015.

The Old Regulation A

Regulation A, before the final rules become effective, provide an exemption from registration in which issuers can raise up to $5 million by selling securities to the public in any 12-month period. Issuers are required to file an offering statement with the SEC consisting of a notification, offering circular, and exhibits. Securities sold in reliance on Regulation A are not “restricted securities” and are freely transferable, but state securities compliance is difficult because most states do not recognize the Regulation A exemption and, at best, give Regulation A offerings full merit review. Because of the limited amount of funds issuers can raise, the information requirements, and the lack of pre-emption of state blue sky laws, Regulation A as it currently exists has been rarely used. Issuers instead use other means of raising capital such as Rule 506 of Regulation D, where issuers can raise an unlimited dollar amount without the reporting requirements and state registration requirements.

The New Regulation A or “Regulation A+”

Eligible Issuers

The final JOBS Act rules make Regulation A available to United States and Canadian issuers that have a principal place of business in either the United States or Canada but do not include issuers that are:

  • Subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “1934 Act”);
  • Registered or required to be registered under the Investment Company Act of 1940 and Business Development Companies (“BDCs”);
  • Blank check companies;
  • Issuers of fractional interests in oil or gas or mineral rights;
  • Not current in the reporting requirements under Regulation A;
  • Subject in the last five years to an order by the SEC denying, suspending, or revoking the registration of a class of securities pursuant to Section 12(j) of the 1934 Act; or
  • Disqualified under “bad actor” Rule 262.

Note that non-Canadian foreign issuers are not allowed to use Regulation A.

Eligible Securities

The final rules allow issuers to rely on Regulation A as an exemption from registration for offers and sales of equity, debt, warrants, and other convertible equity securities. Asset-backed securities are not eligible securities under Regulation A.

Offering Limitations and Secondary Sales

Tier 1

Issuers may make primary offerings of securities of up to $20 million in any 12-month period. Issuers may also use Regulation A for offerings on behalf of selling security holders, but under Tier 1, sales by affiliates are limited to $6 million (an increase from the $1.5 million limitation under old Regulation A). There is no limit on Tier 1 offerings on behalf of non-affiliate selling security holders after the 12 months of an issuer’s first Regulation A offering except the maximum offering limitation of $20 million. During the first twelve months following an issuer’s first Regulation A offering, sales by selling security holders are further limited to no more than 30% of the aggregate offering price.

Tier 2

Issuers may make primary offerings of securities of up to $50 million in any 12-month period. Issuers may also use Regulation A for offerings on behalf of selling security holders, but under Tier 2, sales by affiliated holders are limited to $15 million. There is no limit on resales by non-affiliates after the 12 months of an issuer’s first Regulation A offering except the maximum offering limitation of $50 million. As for Tier 1, during the first twelve months of an issuer’s first Regulation A offering, resales are limited to no more than 30% of the aggregate offering price of a particular offering.

Investment Limitations

In a Tier 1 offering, there is no limitation on the number of securities an investor may purchase, nor is an investor required to meet certain net worth or sophistication criteria. However, in a Tier 2 offering, non-accredited investors who are natural persons are limited to purchasing no more than 10% of the greater of the investor’s annual income or net worth. Non-accredited investors who are not natural persons are limited to purchasing no more than 10% of the greater of the investor’s revenue or net assets.

For investors in a Tier 2 offering who purchase securities that are convertible or exercisable into other securities within a year or are otherwise being qualified in the offering, the investment limitation will include the aggregate conversion or exercise price of those securities, in addition to the purchase price.

These limitations in a Tier 2 offering do not apply to accredited investors or to securities that will be listed on a national securities exchange upon qualification under Regulation A. Issuers may rely on representations by the investor as to their accredited or non-accredited status.


The final rules adopt an integration safe harbor, in which offerings pursuant to Regulation A will not be integrated with:

  • Prior offers or sales of securities; or
  • Subsequent offers and sales of securities that are:
    • Registered under the 1933 Act (except under Rule 255(c));
    • Made pursuant to Rule 701 of the 1933 Act;
    • Made pursuant to an employee benefit plan;
    • Made pursuant to Regulation S;
    • Made pursuant to Section 4(a)(6) of the 1933 Act (crowdfunding); or
    • Made more than six months after completion of the Regulation A offering.

Offerings under Regulation A will not be integrated with other exempt offerings such as Regulation D by the issuer provided those offerings meet the requirements of the exemption being relied upon.

Treatment under Section 12(g)

Section 12(g) of the 1934 Act requires that issuers with total assets exceeding $10 million and a class of equity securities held of record by either 2,000 persons or 500 persons who are not accredited investors must register that class of securities with the SEC. Under the final rules, there is a limited exemption from Section 12(g) provided the following requirements are met:

  • The securities are issued in a Tier 2 offering;
  • The issuer remains subject to and is current with its Regulation A periodic reporting obligations;
  • The issuer uses a transfer agent registered with the SEC pursuant to Section 17A of the 1934 Act; and
  • The issuer has a public float of less than $75 million or if no public float, annual revenues of less than $50 million.

Any issuer who exceeds the number of holders of record under Section 12(g) will have a two-year transition period before it must register its securities under Section 12(g).

Delivery Requirements

The final rules adopt an “access equals delivery” model for final Regulation A offering circulars. Once filed on EDGAR, the final offering circular is deemed delivered to investors. If a preliminary offering circular is used to solicit investors and the issuer is not already subject to the Tier 2 periodic reporting requirements, the issuer and any participating broker-dealer are required to deliver the preliminary offering circular to the prospective investors at least 48 hours in advance of the sale.

Non-Public Submission

Issuers whose securities have not been previously sold pursuant to a qualified offering statement under Regulation A or an effective registration statement under the 1933 Act may submit a draft offering statement to the SEC for non-public review. Such draft offering statement, any amendments, and all correspondence submitted by the issuer is required to be filed on EDGAR not less than 21 days before qualification of the offering statement. Issuers making the non-public submission to the SEC must also file such documents with states in which potential investors reside for a minimum of 21 days before any potential sales.

Form and Content

Offering Statement In General. Issuers relying on Regulation A must file an offering statement on Form 1-A electronically on EDGAR. The Form 1-A consists of three parts:

  • Part I—a fillable form, similar to Form D, to provide basic information about the issuer, eligibility, and offering details;
  • Part II—the disclosure document (which includes a description of the issuer’s business, a description of the securities being sold, the material risks associated with the offering, plan of distribution and selling security holders, the use of proceeds, management’s discussion and analysis, the issuer’s executive officers and directors and their compensation, beneficial ownership of the issuer’s securities and related party transactions) and financial statements; and
  • Part III—attachments including the signatures, exhibits index and exhibits.

Part II is similar to Part I of Form S-1 although the disclosure requirements are scaled. Issuers are required to file financial statements for the two most recently completed fiscal years; U.S. issuers must prepare them in accordance with U.S. GAAP while Canadian issuers may prepare in accordance with IFRS.

Financial Statements. The Regulation A offering statement must include financial information meeting the requirements of the respective tier:

  • Tier 1 offerings require only a current balance sheet and income statement for the two most recently completed fiscal years, in addition to any interim period. If the financial statements are audited, they must be audited by an independent accountant, but not necessarily one that is registered with the Public Company Accounting Oversight Board (“PCAOB”).
  • Tier 2 offerings do require audited financial statements reviewed by an independent accountant (although not required to be PCAOB registered) and prepared in accordance with PCAOB standards.

The final rules extend the age of financial statements to nine months before they are considered “stale” as opposed to the 134 day limitation for smaller reporting issuers and non-accelerated issuers under Regulation S-X.

Continuous or Delayed Offerings

The final rules permit continuous or delayed offerings under Regulation A in certain circumstances such as offers and sales by a person other than the issuer; offers and sales pursuant to an employee benefit plan; securities issued upon exercise or conversion of outstanding warrants, options or rights; securities pledged as collateral; or securities that are part of an offering that begins within two calendar days after the qualification date, will be offered on a continuous basis, may continue to be offered for a period in excess of 30 days from the initial qualification date, and will be offered in an amount that at the time of qualification, is reasonably expected to be offered and sold within two years from the qualification date.


Before a Regulation A offering statement may be qualified, the SEC’s Division of Corporation Finance must take action by issuing a notice of qualification, much the same as a notice of effectiveness in registered offerings.

Testing the Waters

The final rules allow an issuer to “test the waters” by using solicitation materials before and after the issuer files the offering statement with the SEC. The solicitation materials are not required to be submitted at or before the time of first use, but issuers will be required to submit all solicitation materials as an exhibit to the offering statement when submitted for non-public review or filed with the SEC.

Ongoing Reporting

Issuers making Tier 1 offerings are only required to provide information about the offering on Form 1-Z within 30 days of completion or termination of the offering.

Issuers making Tier 2 offerings are required to file the following:

  • Annual reports on Form 1-K;
  • Semi-annual reports on Form 1-SA;
  • Current reports on Form 1-U;
  • Special financial reports on Form 1-K and Form 1-SA; and
  • Exit reports on Form 1-Z

Form 1-K requires information on the issuer’s business for the last three years, two years of audited financial statements, related party transactions, beneficial ownership of officers, directors and 10% or more owners, description of directors and officers, executive compensation information for the last three years, and management’s discussion and analysis covering the two most recently completed fiscal years. This report is due within 120 days from the issuer’s fiscal year end.

Form 1-SA requires information much the same as a Form 10-Q, consisting primarily of financial statements and management’s discussion and analysis. This report is due within 90 days from the end of the issuer’s second quarter.

Form 1-U is much like Form 8-K and is required to be filed within four business days of a material event.

Tier 2 issuers must continue filing these reports until eligible to suspend these reporting requirements or the issuer becomes subject to the periodic reporting requirements of Section 13 or 15(d) of the 1933 Act. Once the issuer completes all of its reporting requirements for the fiscal year in which the Regulation A offering statement was qualified, it may suspend its reporting if:

  • It has filed all ongoing reports required by Regulation A for the shorter of:
    • The period since the issuer became subject to such reporting obligation; or
    • Its most recent three fiscal years and the portion of the current year preceding the date of filing Form 1-Z; and
  • The securities of each class to which the offering statement relates are held of record by fewer than 300 persons; and
  • Offers or sales are made in reliance on a Tier 2 offering under Regulation A are not ongoing.

Rule 15c2-11, Rule 144, and Rule 144A

The final rules amend Rule 15c2-11 of the 1934 Act to provide that an issuer’s ongoing reports filed with the SEC pursuant to a Tier 2 offering will satisfy the specified information about an issuer and its securities that a broker-dealer must review before publishing a quotation for a security. As a result, a secondary market can develop for securities sold in a Tier 2 offering.

The ongoing reports filed by a Tier 2 issuer will not constitute “adequate public information” or “reasonably current information” for purposes of meeting the information requirements under Rule 144 or Rule 144A. To be considered to have provided “adequate public information” or “reasonably current information” under Rule 144 and Rule 144A, the Tier 2 issuer must be current in its semiannual reporting requirements and must voluntarily file quarterly financial statements on Form 1-U. As a result, affiliates of Tier 2 issuers who file the requisite reports will be able to sell securities into the market pursuant to Rule 144.

Bad Actor Disqualification

The final rules adopt amendments to the “bad actor” disqualification provisions found in Rule 262 of Regulation A to more closely match the bad actor disqualification provisions in Rule 506(d) of Regulation D.

State Securities Law Compliance

Under the final rules, Tier 1 offerings do not pre-empt state securities laws and will be subject to state registration and qualification requirements. This likely will result in Tier 1 being little used unless state securities compliance is changed to be less onerous than alternative means of capital raising.

However, securities issued in Tier 2 offerings under Regulation A are now considered “covered securities” under Section 18(b) of the 1933 Act on account of the offer or sale of securities to “qualified purchasers.” The final rules define “qualified purchasers” for purposes of Section 18(b)(4)(D)(ii) to include any persons to whom securities are offered or sold in a Tier 2 offering. States still retain the ability to require certain filings and fees in connection with a Tier 2 offering, as well as the ability to bring enforcement action against fraudulent activities.


So where does all this rule making leave us? A list of some of the pros and cons to Regulation A+:


  • Securities acquired by non-affiliates in a Regulation A offering are not restricted and are freely tradeable;
  • Affiliates who acquire securities in a Tier 2 offering where the issuer meets the reporting requirements will acquire securities that are tradeable after twelve months;
  • Section 13 or 15(d) reporting requirements are not triggered unless the issuer elects to register its securities under the 1934 Act;
  • Issuers may raise up to $50 million;
  • State securities laws pre-empted in Tier 2 offerings;
  • Offering circular requires less disclosure than a Form S-1 registration statement;
  • Cost of compliance is lower than a reporting issuer under the 1934 Act; and
  • Can act as a stepping stone to initial public offering or registration of securities under 1934 Act.


  • For Tier 2 offerings, issuers are subject to reporting requirements similar to Section 13 or 15(d);
  • State securities laws not pre-empted for Tier 1 offerings;
  • Reports filed pursuant to Tier 2 requirements do not constitute “adequate public information” or “reasonably current information for purposes of Rule 144 or Rule 144A” unless Tier 2 issuers also voluntarily file quarterly financials;
  • Tier 2 issuers have only a limited exemption from Section 12(g) registration requirements;
  • Regulation A+ is a new and untested reporting scheme for the market; and
  • Cost of compliance with Tier 2 offerings may equal that of a resale registration statement.

The SEC has been seriously delinquent in rulemaking under the JOBS Act. Title II of the JOBS Act required that the SEC adopt Rule 506(c) allowing general solicitation of accredited investors not later than July 10, 2012; it became effective on September 23, 2013. Title III of the JOBS Act required the SEC to adopt rules to implement the crowdfunding mandate by January 7, 2013; those rules are still languishing and there is no indication that they will be adopted any time soon. The rules implementing Regulation A+ as mandated by Title IV of the JOBS Act took almost three years to be adopted. Time will tell if all the effort at reforming Regulation A was worth it.

Crowdfunding in Colorado is About to Be Legal
By Herrick K. Lidstone, Jr., Burns, Figa & Will, P.C.

Representatives Pete Lee and Daniel Pabon in the House and Senators Mark Scheffel and Owen Hill in the Senate were the primary sponsors of H.B. 15-1246 (the “Colorado Crowdfunding Act” or the “Act”). It was passed by the House on third reading on March 17, 2015, by the Senate on third reading on March 30, and signed by Gov. John Hickenlooper on April 13. Although the law becomes effective on August 5, 2015 (assuming that the legislature adjourns as scheduled on May 6), the availability of crowdfunding as an alternative tool for capital formation in Colorado is dependent upon rulemaking by the Colorado Division of Securities.


Crowdfunding has been a buzzword for a significant period of time, but not involving equity or debt securities in Colorado. Crowdfunding made national headlines when it was authorized by Title III of the Jumpstart Our Business Startups Act (JOBS) Act of 2012, but three years later the Securities and Exchange Commission has not yet adopted rules to implement the JOBS Act requirements for crowdfunding.

Capital raising has been misunderstood by the popular press and other media. An example appeared in the February 8, 2015, Denver Post Business Section where the author described Corbeaux Clothing of Aspen, Colorado, having “raised more than $45,000 through Indiegogo last fall.” While that is true, it was not the full story. Corbeaux did not sell securities—it sold clothing-to-be-manufactured. The Indiegogo site reports that they did raise $45,422 by September 13, 2014, but each contributor was entitled to a perk for the contribution:

  • For $62, the contributor was entitled to a “Women’s Smuggler Tank.”
  • For $65, a “Capitol Tee”
  • For $3,000, “A Full M’s/W/s Collection 1+”

Thus there should have been no expectation by any contributor that they would share in the future profits of the business—only that they will receive the perks if and when available. Kickstarter and other similar sites offer similar rewards-based funding opportunities. Kickstarter avoids securities implications by describing the support given to projects as follows:

Backers are supporting projects to help them come to life, not to profit financially. Instead, project creators offer rewards to thank backers for their support. Backers of an effort to make a book or film, for example, often get a copy of the finished work. A bigger pledge to a film project might get you into the premiere—or land you a private screening for you and your friends. One artist raised funds to create a wall installation, then gave pieces of it to her backers when the exhibit ended.

None of these methods, when operating pursuant to legal requirements, constitute an offering of equity or debt securities where the contributor expects a future interest in being repaid or making a profit. Especially given the prohibitions in the federal and state securities laws for public advertising or general solicitation for anything but a registered offering (and for certain private offerings under amended Rule 506), small business capital formation in Colorado and much of the United States has been lacking. The choices have been a private placement, most of which prohibit public advertising or general solicitation, or pursuing an expensive process to register securities.

Crowdfunding In Colorado

Colorado has long had a crowdfunding alternative through its limited offering registration process found in C.R.S. § 11-51-304(6). This was the subject of an article in August 2014 entitled: “Is Crowdfunding In Colorado Effective Yet? Maybe” and another article published in November 2014, “More on Crowdfunding in Colorado.” Whether because of time delays or cost, there have been few limited offering registrations filed in Colorado since 2008. In fact, the first one since 2008 is currently pending.

Many states have adopted state crowdfunding acts which permit residents to raise a limited amount of equity funding pursuant to the federal exemption for the offer and sale of securities—SEC Rule 147. The North American Securities Administrators Association (“NASAA”) has established an intrastate crowdfunding directory which provides links to specific intrastate crowdfunding exemptions adopted at the state level. As stated by NASAA in the directory introduction:

A growing number of jurisdictions have adopted crowdfunding provisions in their rules or statutes recognizing that equity crowdfunding, done responsibly, with appropriate disclosure and safeguards, may be another valuable tool that small companies can use to raise capital.

Of course, there is always the risk of fraud, as well. This is of course a significant concern to state regulators especially because investors are unlikely to bring litigation to protect themselves given the small amount of their investment. As stated by Professor J. Robert Brown in February 2015, “with the mean pledge amount at about $64, …many backers may not think litigation is worth the cost and the hassle.”

The Colorado Crowdfunding Act—In General

The Colorado Crowdfunding Act differs from the limited offering registration because it is an exemption from registration under the Colorado Securities Act. It is important to note that the Act is subject to rulemaking by the Colorado Division of Securities. Although the Division will likely use the limited offering registration process and forms as a model for the crowdfunding rules, the Colorado Crowdfunding Act will only require various filings with the Division by the issuer and the online intermediary, and will not require Division review. The Act will also require that both the issuer and the online intermediary maintain certain records and make them available to the Securities Commissioner and his staff for inspection.

Practitioners should note that the Colorado Crowdfunding Act is designed to implement the suggestion from NASAA: “that equity [and debt] crowdfunding, done responsibly, with appropriate disclosure and safeguards, may be another valuable tool that small companies can use to raise capital.” Hopefully, the Act will become a useful tool in the capital formation toolbox that should be discussed between entrepreneurs, their legal counsel, and other advisors.

The Colorado Crowdfunding Act—Specifics

The Colorado Crowdfunding Act adds a new section to the Colorado Securities Act, § 11-51-308.5, which will become effective August 5, 2015, assuming that the legislature adjourns as scheduled on May 6, 2015.

Subsection (1) of the Act establishes the Colorado Crowdfunding Act, which creates an exemption from registration under Colorado law, and piggy-backs off of the federal intrastate exemption from registration in 1933 Act § 3(a)(11) and Rule 147. The Colorado Crowdfunding Act repeats some of the requirements of federal law, but the legislators wanted to ensure that the Colorado-centric nature of the bill was front-and-center even to someone who did not understand the federal intrastate exemption.

Subsection (2) of the Act is a rather lengthy legislative declaration that describes the intent of the General Assembly in enacting the legislation.

Subsection (3) is the meat of the Act, and is divided into three paragraphs:

  1. Paragraph (3)(a) sets forth the issuer requirements which generally tracks SEC Rule 147 for the intrastate character of the issuer and the purchaser.
  2. Paragraph (a)(II) limits the amount of the crowdfunding offering in any twelve month period to $1,000,000 unless audited financial statements of the issuer are provided, in which case there is a $2,000,000 limit. This was a focus of debate between the Securities Commissioner and the legislators. The limit in the federal JOBs Act is $1 million, and the majority of the 17 states which have adopted crowdfunding have a $1 million limit or less. The Securities Commissioner pointed out that in Idaho, Indiana, Michigan, Mississippi, North Carolina, Vermont, and Wisconsin, the limit is $1 million, unless the company provides “audited” financials. Then the limit is $2 million. This is the approach adopted in the Act.
  3. Paragraph (a)(III) also limits the amount of any individual’s investment to $5,000 unless the individual is an accredited investor (under the federal definition), in which case the individual amount is unlimited.
  4. Paragraph (a)(IV) also requires that the issuer file a notice and consent to service with the Commissioner, pay a fee to be established by the Commissioner, and prepare and file the disclosure document with the Commissioner (although it is only a notice filing and will not be reviewed).
  5. The minimum offering can be no less than one-half of the maximum offering, and an escrow has to be established. Paragraphs 3(a)(IV)(D) and (F).
  6. The exemption is subject to the bad actor provisions of federal Rule 506(d) (Paragraph 3(a)(XII)), and the issuer must provide certain reports to the owners (Paragraph 3(a)(XIII)).
  7. In order to advertise the crowdfunding offering, the issuer may distribute a notice within Colorado about the offering including a link to the website for the offering maintained by the online intermediary or broker-dealer. § 11-51-308.5(3)(b)(XIV).

Paragraph (3)(b) is rather simple. It says that the crowdfunding offering may be made through a licensed broker-dealer, a licensed sales representative, or through an online intermediary. If made through an online intermediary, the new definition of “online intermediary” and Paragraph (3)(c) are important.

Paragraph (3)(c) imposes various obligations on an online intermediary. A new section (§ 11-51-201(11.5) at page 13 of HB 15-1246) is added to the Colorado Securities Act to define the new term, “online intermediary.”

  1. The online intermediary must make a filing with and pay a fee to the Commissioner. § 11-51-308.5(3)(c)(I).
  2. The online intermediary must maintain certain records. Paragraph 3(c)(II).
  3. Perhaps most importantly, the online intermediary may only post information and make offers on behalf of a crowdfunding issuer—the online intermediary may not accept investments, give investment advice, or engage in securities transactions. § 11-51-201(11.5)(b).
  4. The online intermediary may not hold a financial interest in any issuer or be affiliated with a crowdfunding issuer for which the online intermediary is posting information or “be an owner of any issuer offering [crowdfunding] securities” pursuant to the Colorado Crowdfunding Act. § 11-51-308.5(3)(c)(III).
  5. The online intermediary may not charge a transaction-based fee, but only a fixed fee for presenting the crowdfunding offering information—although that fee may vary but only by the length of time the information is posted. § 11-51-308.5(3)(c)(IV).
  6. The online intermediary is also subject to the federal bad actor provisions. § 11-51-308.5(3)(c)(VII).
  7. Finally, the online intermediary is exempted from the broker-dealer/sales representative licensing requirements of § 11-51-40(1). (New § 11-51-402(1)(c) proposed to be added by HB 15-1246 at page 16 of the bill.)

Future Rulemaking Required

When it becomes effective, the Colorado Crowdfunding Act will not be self-executing. Section 11-51-308.5(4) makes it clear that the Securities Commissioner may adopt rules to implement or enforce the Colorado Crowdfunding Act and to conform it to federal law. In addition, the Act requires that the Commissioner adopt rules to implement various portions of the Act:

  1. Section 11-51-308.5(3)(a)(IV)(A) requires that, not less than ten days before commencing an offering, the issuer must make a notice filing and file a consent to service of process “on a form prescribed by the Securities Commissioner”;
  2. Section 11-51-308.5(3)(a)(IV)(B) requires that the issuer pay fees to be established by the Commissioner;
  3. Section 11-51-308.5(3)(a)(IV)(C) requires that the issuer file a disclosure document with the Commissioner containing the information “that the Securities Commissioner requires by rule” (Section 11-51-308.5(3)(a)(X)).
  4. Section 11-51-308.5(3)(a)(IV)(E) requires that the issuer maintain all records with respect to any crowdfunding offering “as the Securities Commissioner may by rule require.”
  5. Section 11-51-308.5(3)(c)(I)(A) and (E) require that the online intermediary make a filing with the Securities Commissioner and pay a fee as the Securities Commissioner may require.
  6. Section 11-51-308.5(3)(c)(II) requires that the online intermediary “file with the Securities Commissioner specified financial and other information.”
  7. Section 11-51-308.5(3)(c)(II) requires that the online intermediary “not engage in any other activities that the Securities Commissioner, by rule, determines are prohibited by the on-line intermediary.”

Now That I Own It, What Do I Do With It?

Crowdfunding and H.B. 15-1246 do not solve that problem of investors holding closely-held and privately-placed securities—“now that I own these, what do I do with them?” The traditional private placement requires purchasers to acquire securities “for investment purposes only.” While crowdfunded securities under federal Rule 147 do not bear the characteristics of “restricted securities,” there is no easy mechanism for resale, and because of the restrictions found in Section 15 of the Securities Exchange Act of 1934, a state “crowdfund securities exchange” will have significant legal restrictions.

In a March 4, 2015, speech to the Advisory Committee on Small and Emerging Companies, SEC Commissioner Luis A. Aguilar discussed “The Need for Greater Secondary Market Liquidity for Small Businesses.” (This was also the subject of testimony of Stephen Luparello, Director of the SEC’s Division of Trading and Markets to the Senate Subcommittee on March 10, 2015.) In his speech, Commissioner Aguilar noted that the result of recent federal and state initiatives, including Regulation A+ (final rules issued on March 25, 2015) and state crowdfunding, is that a broader group of people will be invested in illiquid investments without, perhaps, fully appreciating the investment restrictions.

Under current federal and state regulation, it is unlikely that exchanges can develop; rather companies will basically have to act as introducing agents and control disclosure and investment opportunities. Commissioner Aguilar proposed a “venture exchange,” but nothing like that exists at the present time and the current legal requirements under the 1934 Act will be significant. More discussion and perhaps action is likely coming.


There will be plenty of opportunity for rulemaking by the Securities Commissioner, but the General Assembly, in testimony and questioning, clearly expressed their hope that the rule-making occur expeditiously, balancing the need for small business capital formation against the need for investor protection.

Crowdfunding as adopted in Colorado and elsewhere will not likely be a panacea for what is lacking in capital formation for small businesses, but properly used can provide an alternative to entrepreneurs.

Group to Review Colorado’s Unincorporated Entity Statutes

More than 77,000 LLCs were formed in Colorado in 2014 as compared to fewer than 10,000 corporations. The Business Law Section has formed a group to review Colorado’s unincorporated entity statutes and determine whether, in light of case law and legislative developments, changes are warranted. If you would like to join the group, please attend a meeting in CLE’s classroom on the third floor at 1900 Grant Street, Denver, CO at noon on June 2, 2015. Some discussion points are in the agenda linked here. If you would like to attend the meeting, please RSVP to ttolbert@cobar.org

Business Law Section Activities
Bankruptcy Subsection

Bankruptcy Court Technology Trainings

The Bankruptcy Court and the CBA Bankruptcy Subsection are offering a free, one-hour, courtroom technology training in Courtroom C, U.S. Bankruptcy Court. Training sessions will be held from 10 to 11 a.m. on May 8, June 19, July 17, August 14, September 18, October 9, and November 13. For more information on the training, please contact Andy Johnson. To register, please email Jill Lafrenz.

Full-Day Consumer Bankruptcy CLE—Friday, June 26

Topics include Chapter 7 and Chapter 13 issues. The program will be held at the CBA-CLE Classroom, 1900 Grant Street, Suite 300, Denver. Additional details to come.

Financial Institutions Subsection

Repair Regulations: Game Changer for Financial Institutions
Wednesday, May 20, noon to 1 p.m (option to purchase lunch)

Co-sponsored by the Financial Institutions Subsection of the CBA Business Law Section

This program will review how repair regulations, effective January 1, 2014, may offer significant deductions and reduce future tax liabilities for financial institutions. Learn the impact of the regulations on such items as previously capitalized renovations, partially disposed assets, and depreciation recapture, plus how to take advantage of, and to comply with, the new regulations

The program will be held at the CBA-CLE offices, 1900 Grant Street, Suite 300, Denver. This program is offered for 1 general CLE credit. Learn more, view program faculty, and register online.

Financial Institutions Subsection Networking Happy Hour
Wednesday, June 17, 5:30 to 7:30 p.m

Co-sponsored by the Financial Institutions Subsection of the CBA Business Law Section

Please join us for a free happy hour to say “Thank You” to outgoing chair, Steve Suneson, and “Welcome” to our newly elected co-chairs.

The event will be held at Cru Food & Wine Bar in Larimer Square (1442 Larimer Street, Larimer Square). Two complimentary drink coupons and hors d’oeuvres are included with registration. This is a free event, but for food planning purposes we ask that you register in advance. RSVP to lunches@cobar.org, call 303-860-1115, ext. 727, or click here to register online. Please note you must be logged in to the website in order to register for the program.

We look forward to seeing you there!

The Financial Institutions Subsection will take a summer break from their CLE series. There are no programs in June, July and August, but will resume in September..

Franchise Subsection

Franchising Update: Lessons from Renewal Season and Trends in Litigation
Friday, May 29, noon to 1 p.m. (Complimentary lunch will be provided)

Co-sponsored by the Financial Institutions Subsection of the CBA Business Law Section

This program will provide a review of lessons learned from the 2015 renewal season. Additionally, the speakers will provide an overview of trends in current franchise litigation, including common claims, defenses, and outcomes.

This free program will be held at the CBA Executive Suite, 1900 Grant Street, 9th floor, Denver. The program is offered for 1 general CLE Credit. Pre-registration is required. Please RSVP by emailing lunches@cobar.org or click here for more information or to register online. Please note you must be logged in to the website in order to register for the program. When registering, please indicate that you would like to participate by phone if you wish to do so. The day before the program, we will email the materials as well as the call in number to registered call-in participants.

International Transactions Subsection

Drafting International Arbitration Language/Agreements: Practical Tips
Tuesday, May 12, noon to 1 p.m. (option to purchase lunch)

Co-sponsored by the International Transactions Subsection of the CBA Business Law Section

This session is packed with practical tips for drafting international arbitration language in contracts for your clients doing business internationally. Your experienced presenters will address key considerations, provisions, clauses and principles. You will learn how to better draft arbitration clauses in sync with client needs and goals, and other provisions of the contract, plus learn what to look for when reviewing arbitration clauses in contracts prepared by others, taking into account procedural and substantive requirements of the governing law and that of the arbitration venue.

The program will be held at the CBA-CLE offices, 1900 Grant Street, Suite 300, Denver. This program is offered for 1 general CLE credit. Learn more, view program faculty, and register online.

Mergers & Acquisitions Subsection

Employment Law Issues in M&A—The Things That Fall Through the Cracks
Tuesday, May 5, 8 to 9 a.m.

Co-sponsored by the M&A Subsection of the CBA Business Law Section

Gillian Bidgood, an experienced employment law practitioner, will discuss various employment law issues that are triggered by M&A activities which sometimes fall through the cracks when focusing on other aspects of the transaction. Ms. Bidgood will discuss the requirements of the Worker Adjustment and Retraining Notification Act (WARN Act) and how they impact the structure and terms of the transaction. She will also discuss Colorado’s Wage Act and the requirements that a seller must consider as part of the transaction.

The program will be held at the CBA-CLE offices, 1900 Grant Street, Suite 300, Denver. This program is offered for 1 general CLE credit. Learn more, view program faculty, and register online.

The M&A Subsection will take a summer break from their CLE series. There are no programs in June, July and August, but will resume in September.

CBA-CLE Information

Unless noted, programs are held at the CBA-CLE offices, 1900 Grant St. Ste. 300, Denver

Closely Held Businesses: Strategies for Tackling Key Issues
Thursday, April 30, 8:55 a.m. to 4:15 p.m.

Co-sponsored by the Business Law Section of the Colorado Bar Association

Advising closely held businesses and their owners requires you to be knowledgeable on a wide range of issues. Your expert guidance must often include individual personalities and business dynamics along with financial and securities issues to avoid failure of a legal plan. Whether you are a seasoned business lawyer, expanding your practice, new to the field, or simply need a refresher, this program will provide you with practical advice in important areas for advising closely held business owners. Program highlights include:

  • Family Dynamics and Small Businesses
  • Impact of the Affordable Care Act on Small Businesses
  • Issues in Probating Business Interests
  • Charitable Planning Using Closely Held Business Interests
  • The Ethical Minefield of Advising Family Owned Businesses
  • Small Business Financials and Accounting
  • Securities Issues for Closely Held Businesses

The program is offered for 7 general CLE credits, including 1 ethics. Learn more, view faculty, and register online.

47th Annual Rocky Mountain Securities Conference
Thursday, May 7, from 7:50 a.m. to 5:10 p.m.

This is the Rocky Mountain Region's premier securities conference presented by many of the country’s most knowledgeable securities practitioners—with keynote speaker Hon. Mary Jo White, SEC Chair. With unmatched networking opportunities, you can learn from local, statewide, and national practice leaders.

Topics include:

  • Enforcement Update: Current National and Regional Priorities, Legal Developments, and Notable Cases
  • The View from the Defense Side
  • A Conversation with the Division of Corporation Finance
  • Ethical Considerations in the SEC’s Whistleblower Program
  • Regulated Entities—Hot Topics
  • Audit Committees: Operating in an Environment of Increased Regulatory Scrutiny
  • Reg D and Crowdfunding: Practice and Regulatory Update
  • General Counsel Roundtable
  • The Boundaries of “Ethical” Representation—Defense and SEC Perspectives
  • Flash Courses: To Cooperate or Not to Cooperate? That is the Question; Litigating with the SEC: Does Forum Matter?; Fees in an Evolving Asset Management Industry

The program will be held at the Denver Marriott City Center, Denver, CO. The program is offered for 8 general CLE credits including 2 ethics. Learn more and register online.

A Primer on Advising Nonprofit Organizations
Thursday, May 14, 8:55 a.m. to 12:35 p.m.

Co-sponsored by the Business and Taxation Law Sections of the Colorado Bar Association, the Colorado Nonprofit Association, and the Colorado Society of Association Executives

The 2015 Primer is designed to introduce practitioners to more general aspects of the laws governing the formation and operation of nonprofit organizations, obtaining and retaining tax-exempt status, taxation of unrelated business income, the distinctions between nonprofit entities, and operational issues for tax-exempt organizations.

The program is offered for 4 general CLE credits. Learn more, view program faculty, and register online.

24th Annual Institute on Advising Nonprofit Organizations in Colorado
Friday, May 15, 8:55 a.m. to 4:25 p.m.

Co-sponsored by the Business and Taxation Law Sections of the Colorado Bar Association, the Colorado Nonprofit Association, and the Colorado Society of Association Executives

The 24th Annual Institute will present a comprehensive analysis of legal issues of concern to nonprofit organizations. The program will benefit attorneys, key representatives of nonprofit organizations, including board members, executive directors, chief financial officers, accountants, and representatives of governmental agencies. Program Highlights:

  • 2015 Tax Law Update
  • Fiduciary Duties of For-Profit Boards
  • 501(c)(4), 501(c)(5) and 501(c)(6) Entities: What are They and Why Should They Worry?
  • Sports & Anti-Doping
  • When is it Time to Right the Ship: Best Practices for Discipline and Termination
  • Secretary of State Update
  • Simplified & Streamlined—Considerations Related to Form 1023-EZ
  • Tax Exempt Bond Issuances
  • Volunteers

The program is offered for 7 general CLE credits. Learn more, view program faculty, and register online.

13th Annual Rocky Mountain Intellectual Property & Technology Institute
Thursday & Friday, May 28–29

The 2015 Rocky Mountain IP & Technology Law Institute provides a guide to how the new realities of protecting innovation, the rise of data security and privacy breaches and liability, social media and Big Data are affecting the way you practice. Four simultaneous tracks of sessions, led by practice and thought leaders nationwide, will examine how IP, tech and transactional law have changed and may impact the advice you give clients about protecting their innovations, commercializing those innovations through licensing, or funding or selling their enterprises.

The program will be held at the Westin Westminster Hotel, 10600 Westminster Blvd., Westminster, CO. The program is offered for 15 general CLE credits including 2 ethics. Learn more and register online.

Recent Homestudies

Check out the complete catalog of CLE Homestudies—search by practice area or credits.

New CBA-CLE Book

Colorado Bar Association CLE offers a number of substantive publications and some excellent business law books published by the American Bar Association including The Keys to Banking Law—A Handbook for Lawyers, 1st Ed. Click here to view a complete list from the online bookstore.

Contributions for future newsletters are welcome —
Contact Ed Naylor at ed.naylor@moyewhite.com or 303-292-2900

This newsletter is for information only and does not provide legal advice.

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