November 2015

As you may have heard, the SEC has finally adopted the rules required to implement the crowdfunding exemption. The final release (686 pages) is available here.

But the crowdfunding exemption was not the only item on the SEC’s agenda. At the same meeting, it proposed some rather significant amendments to Rule 504 of Regulation D and to Rule 147, the intrastate offering safe harbor. The release proposing those changes is available here. (It’s only 168 pages.)

The proposed amendment to Rule 504 would increase the dollar amount of the exemption from $1 million to $5 million and would also add bad actor disqualifications similar to those that currently apply to Rules 505 and 506.

The proposed changes to Rule 147 would almost significantly restructure the rule. Here’s a description of the significant changes, taken from an SEC news release:

The proposed amendments would modernize Rule 147 to permit companies to raise money from investors within their state without concurrently registering the offers and sales at the federal level.  The proposed amendments to Rule 147 would, among other things:

  • Eliminate the restriction on offers, while continuing to require that sales be made only to residents of the issuer’s state

…

Pat Haden is the athletic director at the University of Southern California. Until Friday, he was also a member of the College Football Playoff selection committee. And, according to this story in the L.A. Times, he is also a director of at least nine non-profits or foundations and three businesses.

According to the Times, Haden spends an average of 70 hours a week on his U.S.C. job. As a playoff selection committee member, he was expected to spend countless hours watching football games and evaluating teams.

So where does he find the time to serve as a board member? Not a problem, according to Haden. He has “never been to one meeting” of some of the nonprofits he serves. And he spends “very little” time on his board positions.

Haden’s attitude is representative of an earlier era when outside directors merely showed up at meetings and nodded their head to whatever the chairman said. Those days are long gone. Today, board members are expected to spend much more time on their board duties, at the risk of liability if they don’t.

Mr. Haden, a former Rhodes Scholar, is a very bright guy, but even bright guys can say…

I teach both Civil Procedure and Business Associations. As a former defense-side commercial and employment litigator, I teach civ pro as a strategy class. I tell my students that unfortunately (and cynically), the facts don’t really matter. As my civil procedure professor Arthur Miller drilled into my head 25 ago, if you have procedure on your side, you will win every time regardless of the facts. Last week I taught the seminal but somewhat inscrutable Iqbal and Twombly cases, which make it harder for plaintiffs to survive a motion to dismiss and to get their day in court. In some ways, it can deny access to justice if the plaintiff does not have the funds or the will to re-file properly. Next semester I will teach Transnational Business and Human Rights, which touches on access to justice for aggrieved stakeholders who seek redress from multinationals. The facts in those cases are literally a matter of life and death but after the Kiobel case, which started off as a business and human rights case but turned into a jurisdictional case at the Supreme Court, civil procedure once again “triumphed” and the doors to U.S. courthouses closed a bit tighter for litigants. …