California’s General Announcement Exemption

Issuers offering or selling securities in California must qualify those offers and sales with the Department of Corporations unless they are exempt from, or not subject to, qualification. Cal. Corp. Code § 25110. Since the enactment of the Corporate Securities Law in 1968, the Legislature has added exemptions and Congress has preempted state qualification requirements with respect to many issuers and transactions. Today, the CSL’s qualification requirement resembles Porphyra peforata as it is similarly pierced with many holes. When I served as Commissioner of Corporations, I liked to say that “we regulate by exemption”.

Nonetheless, the qualification requirement remains a real issue – particularly for small businesses trying to raise capital. Because California’s limited offering exemption, Cal. Corp. Code § 25102(f) prohibits general advertising, many businesses have found it difficult to locate investors. Recognizing this problem, the Department of Corporations sponsored SB 1951 (Killea) in 1994 to establish a new transactional exemption from the qualification. That bill added Cal. Corp. Code § 25102(n) to exempt offerings to qualified investors, as defined. Significantly, this exemption allows the issuer to publish a general announcement of the proposed offering. However, there are a number of important conditions and limitations to the exemption. For example, the exemption is not available to “blind pools” and requires the filing of two notices of transaction with the Department. Therefore, anyone relying on the rule should review these conditions and limitations carefully.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

Written by:

more+
less-

Allen Matkins Leck Gamble Mallory & Natsis LLP on:

JD Supra Readers' Choice 2016 Awards
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×