Скачать или смотреть General Solicitation and Testing the Waters in a Regulation A Offering

General Solicitation and Testing the Waters in a Regulation A Offering- Today is the continuation in a Lawcast series talking about Regulation A and in particular today I am going to touch on general solicitation and testing the waters in a Regulation A offering. Back in September 2016, I did an in-depth Lawcast series on this subject as well.
Other than the investment limits, anyone can invest in a Regulation A offering, but of course, they have to know about it first – which brings us to marketing. All Regulation A offerings are allowed to engage in general solicitation and advertising. However, Tier 1 offerings are required to review and comply with applicable state law related to such solicitation and advertising, including any prohibitions.

Regulation A allows for pre-qualification solicitations of interest in an offering, commonly referred to as “testing the waters.” Issuers can use “test the waters” solicitation materials both before and after the initial filing of the offering statement. A company can use social media, internet websites, television and radio, print advertisements, and any means they can think of. Marketing can be oral or in writing, with the only limitations being certain disclaimers and truth. Although a company can and should be creative in its presentation of information, there are laws in place with serious ramifications requiring truth in the marketing process. Investors should watch for red flags such as clearly unprovable statements of grandeur, obvious hype or any statement that sounds too good to be true – as they are probably are just that.

When using “test the waters” or pre-qualification marketing, a company must specifically state whether a registration statement has been filed and if one has been filed, provide a link to the filing. Also, the company must specifically state that no money is being solicited and that none will be accepted until after the registration statement is qualified with the SEC. Any investor indications of interest during this time are 100% non-binding – on both parties. That is, the potential investor has no obligation to make an investment when or if the offering is qualified with the SEC and the company has no obligation to file a registration statement or if one is already filed, to pursue its qualification. In fact, a company may decide that based on a poor response to its marketing efforts, it will abandon the offering until some future date or forever.

Solicitation material must also specifically state that no offer to buy securities can be accepted and any offer can be withdrawn before qualification, and a person’s indication of interest does not create a commitment to purchase securities.

All solicitation material must be submitted to the SEC as an Exhibit under Part III of Form 1-A. This is a significant difference from S-1 filers, who are not required to file “test the waters” communications with the SEC.

A company can use Twitter and other social media that limit the number of characters in a communication, to test the waters as long as the company provides a hyperlink to the required disclaimers. In particular, a company can use a hyperlink to satisfy the disclosure and disclaimer requirements in as long as (i) the electronic communication is distributed through a platform that has technological limitations on the number of characters or amount of text that may be included in the communication; (ii) including the entire disclaimer and other required disclosures would exceed the character limit on that particular platform; and (iii) the communication has an active hyperlink to the required disclaimers and disclosures and, where possible, prominently conveys, through introductory language or otherwise, that important or required information is provided through the hyperlink.

Of course, all “test the waters” materials are subject to the antifraud provisions of federal securities laws.

Ongoing regularly released factual business communications, not including information related to the offering of securities, are not considered solicitation materials and therefore do not have to contain the required disclaimers or be filed with the SEC.