How Far We Haven't Come: The Revolution Will Not Be Securitized

by King & Spalding
Contact

While SEC FinHub’s new framework announced last week for identifying crypto-securities suggests continued resistance for those using digital assets to access capital markets, an SEC no-action letter issued the same day to TurnKey Jet—concluding that tokens operating as digitized gift certificates are not securities—suggests a path forward for issuing tokens with a clear purpose other than raising funds, providing an opportunity in areas aside from capital markets, such as tokenized event tickets.

On April 3, 2019, the Securities and Exchange Commission’s Strategic Hub for Innovation and Financial Technology (FinHub) published a long-awaited framework for determining whether a digital asset offered and sold through an Initial Coin Offering (ICO) or Security Token Offering (STO) is a security.  The FinHub framework focuses on the Supreme Court’s Howey test for identifying investment contracts.[i]  Under Howey, courts have determined that there is an investment contract, and consequently a security, where there is an investment of money, in a common enterprise, with an expectation of profits from the efforts of others.  Any digital assets that meet Howey’s test for a security would need to be registered with the Commission unless an exemption applies.  The new framework focuses on Howey’s third factor: determining whether purchasers of a digital asset have a reasonable expectation of profits derived from the efforts of others.

On the same day as the announcement of FinHub’s framework, and applying some of the same guidance, the SEC’s Division of Corporation Finance (Corp Fin) issued a no-action letter to TurnKey Jet, Inc.  TurnKey, who provides charter flights on private jets,[ii] had proposed a plan to offer and sell digital tokens that could be used to book flights.  This was the first time Corp Fin issued a no-action letter addressing a blockchain tokenized project.  In the letter, on the basis of facts supporting the determination that the digital assets are not securities, Corp Fin opined that it would not recommend an enforcement action to the SEC if TurnKey offers and sells the tokens without registration under the Securities Act of 1933, as amended, and the Exchange Act of 1934, as amended.

The new FinHub framework and TurnKey’s no-action letter are notable developments, but lack clarity for the majority of the digital asset community.  In fact, there is no reason to expect that the new guidance will change the stranded fortunes of all the ICO and STO promoters trying to make crypto-securities a reality.  Together, however, the TurnKey letter and the new framework offer a hopeful glimpse of how the SEC’s Crypto Czar, Valerie Szczepanik, plans to influence policy going forward.

Notably, the push to deploy distributed ledger, or blockchain, technology to access U.S. capital markets has largely stalled: Regulation A+, which allows for crowdfunding, has yet to provide capital access for any blockchain-issued securities; Regulation D has provided some access to primarily accredited investors in private placements, but retail capital markets tend to remain out-of-bounds; and Regulation S, which covers the issuance of foreign securities, has seen more robust activity but excludes domestic markets by definition.  In sum, the Commission has policed U.S. capital markets aggressively to make clear that an exciting new technology does not avoid application of the securities laws, or their registration and disclosure requirements.[iii]

But blockchain enthusiasts should not be discouraged.  Instead, they should consider looking past capital markets and focus on applying blockchain technology to markets and payment schemes not falling under the securities laws.  For example, Corp Fin’s no-action letter to TurnKey suggests tokenization opportunities may be available for other instruments previously determined to fall outside the definition of a security—one example is tickets for concerts and sporting events.

FinHub’s New Digital Asset Framework—Continued Reliance on Howey

FinHub’s new framework was created to help market participants assess whether a digital asset is an investment contract, and if it falls within the definition of a security under the U.S. Federal securities laws.  The guidance explains that most digital asset sales reviewed by the Commission’s staff satisfy the Howey test’s first two prongs: (1) an investment of money;[iv] (2) in a common enterprise.[v]  The new framework is heavily focused on the Howey test’s third prong, “a reasonable expectation of profits derived from efforts of others.”  Traditionally, an asset purchaser has an expectation of profits if a stock pays dividends, a bond promises interest payments, or if the purchaser reasonably expects the asset to appreciate in value.[vi]  The Supreme Court has distinguished assets that are purchased with an expectation of profit from those where the purchaser intends to “use or consume the item purchased… .”[vii]  Even if there is an expectation of profit, the Howey test only includes circumstances where those profits come from the efforts of others, not solely from impersonal market forces or from the investor’s own efforts.[viii]  The “efforts” element is satisfied if the promoter retains a critical role, a role without which the enterprise cannot succeed.[ix]

FinHub’s framework provides important new information on two fronts.  First, the framework confirms the prior comments of Corp Fin Director Bill Hinman in acknowledging that a digital asset could be a security when it is first issued but may subsequently cease to be a security later in time, requiring reevaluation.[x]  For example, over time a digital asset’s value may no longer depend upon the efforts of the initial promotor or issuer.[xi]

Second, the framework provides guidance on how digital asset creators can avoid creating an expectation of profit by restricting marketability, transferability, and redemption rights.[xii]  For example, digital asset creators can preclude trading on secondary platforms and maintain tight control over user access to the primary platform, or prevent risk of market speculation by offering an unlimited quantity of the asset for sale at a flat price.

TurnKey Jet’s No-Action Letter—Gift Certificates are Not Securities

TurnKey operates two private business jets and provides air taxi and charter services.[xiii]  Because of the substantial expense associated with private jet charters, TurnKey found that some clients struggled with bankers’ hours—after five o’clock it was difficult for customers to transfer sufficient funds for last-minute bookings.  Seeing virtual currency as a potential solution, TurnKey proposed to Corp Fin that the company would sell tokens to customers that could be redeemed when booking a flight.  Each token would sell for $1, with no restrictions on purchasers or timing of purchases, which would prevent the value of the tokens from ever rising above $1.  The proceeds from token sales would be held in escrow and accessed only when tokens were redeemed for air travel services—the proceeds would not be used to develop TurnKey’s platform or for any other investment purpose.  In TurnKey’s proposal, its platform would extend broadly to air charter brokers and other carriers, so any private flight broker or charter operator willing to accept TurnKey’s tokens from customers could then redeem the tokens with TurnKey and receive funds from the escrow account holding the token sale proceeds.

TurnKey’s success in obtaining the no-action letter did not come overnight—the company reportedly worked with the SEC for eleven months, submitting multiple new versions of its proposal.[xiv]  Likely, those negotiations focused on characteristics of TurnKey’s program designed to prevent the tokens from being used for anything but private air travel.[xv]  In essence, TurnKey plans to offer digitized gift certificates for air charter services.  Although TurnKey has avoided registration under the securities laws, TurnKey emphasized in its letter to Corp Fin that it must still comply with stringent regulations as a member of the private charter industry, including anti-money laundering regulations.[xvi]

The SEC’s no-action letter focused on six key factors: (1) TurnKey’s platform will be built in advance, not developed using the proceeds from token sales; (2) tokens can be used as intended at the time of sale; (3) tokens will not be transferrable except to other TurnKey wallets; (4) TurnKey’s measures to ensure the tokens never climb above $1 in value; (5) TurnKey will not repurchase tokens except at a discount to the $1 face value; and (6) TurnKey will limit its marketing of tokens, emphasizing their functionality, with no suggestion that the tokens could increase in value.

Because of TurnKey’s extensive restrictions to prevent speculation or alternative use of the tokens, the no-action letter was not a difficult decision for Corp Fin.  Previously, the SEC has issued no-action letters for comparable proposals, including prepaid school tuition certificates and prepaid funeral services.[xvii]  As early as 1958, the SEC issued an opinion that although an item like one of TurnKey’s tokens might appear to be an “evidence of indebtedness,” like “streetcar tokens, meal tickets, Christmas gift certificates, box tops, railroad or theatre tickets… Congress did not intend to include such items within the scope of the statute.”[xviii]  It is clear that the Commission required TurnKey to have controls in place to make sure that its tokens were not too easily transferrable: if gift certificates are not securities, then digital gift certificates are not securities either.[xix]

Alternative Paths to Issuance Have Had Limited Impact

Even with FinHub’s new framework, in most cases, companies issuing digital assets to raise funds are unlikely to avoid the registration and disclosure obligations of the securities laws.  Prior to this new guidance, many companies accepted that digital assets are securities, and have worked creatively within the securities laws to find alternative paths to access capital markets, including Regulations A+, D, and S.  However, the results have been underwhelming, as no digital assets have been offered or sold by an issuer under Reg A+, and Reg D does not offer access to retail capital markets.  Moreover, Reg S is not a practical option for U.S.-based companies because the rule only covers securities transactions made to persons outside of the United States.

Regulation A+

Reg A+, a 2015 update to Reg A, was designed to offer issuers seeking smaller amounts of capital (less than $50 million) an easier path to access the U.S. retail market, when compared with the typical burden and expense of registering with the Commission.  Under Reg A+, new issuers must file an offering statement with the Commission.  Until SEC staff review and qualify the offering statement, the issuer cannot sell securities, though preliminary discussions with potential investors are permitted.  Secondary trading of Reg A+ securities is permitted, but generally the markets for these securities are thin.[xx]

Many companies have sought qualification for blockchain-based securities, but thus far, none have been successful.  For example, StartEngine, a crowdfunding platform, came close to issuing blockchain-based securities under Reg A+.  Its offering, qualified by the Commission staff, states that the company is working to develop and issue digital assets alongside traditional securities.[xxi]  The offering, however, is a scaled-back version of the original proposal, before Commission staff provided feedback, which stated that the securities offered would be issued “in the form of electronic tokens.”[xxii]  StartEngine is still required to use a traditional transfer agent, rather than having sales of securities recorded on a blockchain ledger.[xxiii]  Although StartEngine’s offering was finally qualified by the Commission to start selling securities, for many blockchain securities advocates this appears to be a pyrrhic victory.

Regulation D

In the U.S., Reg D is the most popular exemption for issuers of digital assets, but the investor pool is largely restricted to accredited investors.[xxiv]  Different subsections of Reg D provide issuers with different options—for example, under Rule 506(b), an issuer may sell to an unlimited number of accredited investors and up to 35 sophisticated but non-accredited investors, but the issuer cannot use general solicitation or advertising.[xxv]  Under Rule 506(c), an issuer can solicit and advertise generally, but all investors must be accredited.[xxvi]  Further, Reg D securities have restrictions on transfer after issuance.  Despite these restrictions, Reg D remains the most popular avenue for digital asset issuers targeting U.S. capital markets.

Regulation S

Reg S covers securities issued outside the U.S., including sales of digital assets.  To rely on Reg S, the offer or sale must be made as part of an “offshore transaction”—a transaction where offers are not made to a “person in the United States”—and there must be no “directed selling efforts” in the U.S.[xxvii]  The actual purchase must occur offshore as well—either the buyer is “outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer is outside the United States,” or the transaction is executed on an “established foreign securities exchange.”[xxviii]  Issuers of digital assets relying on Reg S must take reasonable care to identify purchasers to avoid selling to U.S. persons.  Secondary sales are generally unrestricted, except for equity securities of domestic issuers.[xxix]  Thus, while Reg S issuance may be practical for non-U.S. companies, it will not be a viable option for U.S.-based crypto companies.

The TurnKey No-Action Letter Provides an Opportunity for Policy Advancement in New Areas Aside from Capital Markets

The TurnKey no-action letter provides an interesting reveal of how Valerie Szczepanik, SEC’s Crypto Czar, may intend to influence policy in her role within Corp Fin.  Szczepanik started within the Commission’s Enforcement Division and oversaw some of the first-ever crypto enforcement cases.  The Commission’s decision to place Szczepanik’s position under Corp Fin, rather than Enforcement, suggested a forward-looking, policy-making approach with more opportunities for dialogue with digital asset companies.  TurnKey’s no-action letter is a positive example that the Commission is committed to working together with companies to advance policy and increase regulatory certainty.

The letter is also an opportunity for other companies or policy advocates to influence the SEC on digital asset regulation.  Instead of trying to establish new policy foundations, advocates should consider looking to prior guidance from the Commission that identifies other assets that are excluded from the definition of securities.  If TurnKey’s position can be summarized as, ‘gift certificates are not securities, and therefore digital gift certificates are not either,’ then comparable policy opportunities likely exist as well.

One such example is tokenized event tickets.  The U.S. retail market for event tickets, including sporting events, concerts, and movies, is worth more than $28 billion per year, increasing annually by 7% or more.[xxx]  Transaction costs are high with fees to brokers averaging approximately 30%.[xxxi]  With margins so high, it is no surprise that start-ups have identified the opportunity for blockchain technology to increase ticketing security and automation, while still lowering costs.[xxxii]  Beyond event tickets, the possibility of putting season ticket licenses for professional sports teams on the blockchain also appears within reach.

The Commission already has a long-standing opinion that “theatre tickets” do not fall under the definition of a security.[xxxiii]  Further, Corp Fin issued a 2003 no-action letter to Ticket Reserve, Inc. confirming that sports tickets and other event tickets were not securities.[xxxiv]  Ticket Reserve’s proposal went beyond just direct, retail ticket sales—it included a marketplace where tickets could be bought and sold, including by persons trying to resell tickets for profit.[xxxv]  In 2006, the owners of the San Francisco Giants baseball team received a no-action letter from Corp Fin confirming that seat licenses which entitle the holder to purchase season tickets were not securities either, at least as sold and transferred within the Giants program.[xxxvi]

Based on such precedent, any blockchain event ticket company would be well-positioned to approach Corp Fin seeking a no-action letter for digital event tickets and a blockchain-based market for buying and selling tickets.  Notwithstanding these prior decisions, which make clear that event tickets are not securities, how a platform to buy and sell tickets is structured, and how that platform is marketed, could risk scrutiny from Commission staff.  The platform should be designed and marketed with the clear intent to facilitate ticket sales to retail consumers that want to use the tickets.  It should not be designed or marketed as a way to buy, sell, and speculate on event tickets with the hopes of making a profit.  As with the TurnKey proposal, marketing materials should be focused on consumers that will use the tickets to attend events.  Partial restrictions on ticket transfer may be helpful as well to reduce the risk of price speculation.  Just as TurnKey noted that it was still subject to substantial regulation and oversight, any other company that obtains no-action relief from Corp Fin will still be covered by other substantive laws and regulations.

Conclusion

FinHub’s new framework for determining which digital assets are securities and Corp Fin’s no-action letter to TurnKey are noteworthy developments, but they do not necessarily signal dramatic changes in the path forward for blockchain companies seeking to access U.S. capital markets.  But companies like TurnKey, who are using blockchain for goals other than fundraising, may have a new template for ensuring their activities do not inadvertently implicate the securities laws.

[i] Securities and Exchange Commission, Framework for “Investment Contract” Analysis of Digital Assets (Apr. 3, 2019), https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets.

[ii] TurnKey Jet, Inc., SEC No-Action Letter (Apr. 3, 2019).

[iii] In this sense, Chairman Clayton has delivered on his warning that the Commission would not relax application or enforcement of the securities laws for blockchain companies.  While some have argued for cutting red tape to allow nascent blockchain technologies to advance, Chairman Clayton’s position has been that technological progress is best aided through fair disclosure, investor protection, and market integrity.  SEC Chairman Jay Clayton and CFTC Chairman Christopher Giancarlo, Regulators Are Looking at Cryptocurrency, Wall St. J., Jan. 24, 2018, https://www.wsj.com/articles/regulators-are-looking-at-cryptocurrency-1516836363.

[iv] Courts have found investments of money based on almost any valuable exchange, whether something is sold for fiat currency, for virtual currency, SEC v. Shavers, No. 4:13-CV-416, 2013 WL 4028182, at *2 (E.D. Tex. Aug. 6, 2013), or in exchange for something else of value, Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am. v. Daniel, 439 U.S. 551, 560 n. 12 (1979); Thomas Lee Hazen, the Law of Securities Regulation § 1.6(2)(A) (7th ed. 2016).

[v] “Common enterprise” may be shown based on close common interest among a group of investors, termed horizontal commonality, or close common interest between an investor and the promoter, termed vertical commonality.  S.E.C. v. SG Ltd., 265 F.3d 42, 49 (1st Cir. 2001) (explaining both horizontal and vertical commonality and noting vertical commonality theory accepted in some, but not all circuits).

[vi] United Hous. Found., Inc. v. Forman, 421 U.S. 837 (1975) (dividends and appreciation in value); S.E.C. v. Edwards, 540 U.S. 389, 396 (2004) (identifying regular periodic payments and stating that the Courts examples are not exclusive).

[vii] United Hous. Found., Inc. v. Forman, 421 U.S. 837, 852-53 (1975).

[viii] S.E.C. v. W.J. Howey Co., 328 U.S. 293, 299 (1946); Sec. & Exch. Comm'n v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476 (9th Cir. 1973), cert. denied, 414 U.S. 821 (1973); Stewart v. Ragland, 934 F.2d 1033, 1038 (9th Cir. 1991) (finding “efforts of others” element could not be satisfied where partners in oil-and-gas scheme had ample business expertise and substantial legal rights to control the enterprise).

[ix] Affco Investments 2001, L.L.C. v. Proskauer Rose, L.L.P., 625 F.3d 185, 190 (5th Cir. 2010) (“[T]he proper standard for analyzing the third prong of the Howey test is whether the efforts made by those other than the investor are the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise.”) (quotation marks omitted); S.E.C. v. Goldfield Deep Mines Co. of Nevada, 758 F.2d 459, 464 (9th Cir. 1985) (finding satisfaction of the “efforts of others” element where investors in an ore refinement program were dependent upon promoter for refinement because of high barrier to using independent contractor for refinement); S.E.C. v. Koscot Interplanetary, Inc., 497 F.2d 473, 483 (5th Cir. 1974) (“[T]he critical inquiry is whether the efforts made by those other than the investor are the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise.”) (quotation marks omitted).

[x] Director William Hinman, SEC Division of Corporate Finance, Digital Asset Transactions: When Howey met Gary (Plastic), (Jun. 14, 2018), https://www.sec.gov/news/speech/speech-hinman-061418.

[xi] Securities and Exchange Commission, Framework for “Investment Contract” Analysis of Digital Assets, at 5 (Apr. 3, 2019), https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets.

[xii] Id. at 6-7.

[xiii] James P. Curry, Letter to Securities and Exchange Commission regarding “TurnKey Jet, Inc” (Apr. 2, 2019), https://www.sec.gov/divisions/corpfin/cf-noaction/2019/turnkey-jet-040219-2a1-incoming.pdf.

[xiv] Brady Dale, SEC’s First Crypto ‘No-Action’ Letter Took 11 Months to Secure, CoinDesk (Apr. 3, 2019), https://www.coindesk.com/secs-first-crypto-no-action-letter-took-11-months-to-secure.

[xv] For example, making the tokens freely available for purchase for $1 should prevent speculation and any risk that token prices would ever rise above $1.  Further, the tokens will only be held in proprietary wallets created by TurnKey; users must register with TurnKey to obtain a wallet and token transfers will be limited to other TurnKey wallets.  Additionally, TurnKey customers cannot redeem tokens for cash, and redemptions are limited to brokers and carriers.  Without this limit, TurnKey tokens could theoretically operate as a stablecoin, a virtually currency with a fixed value, which could attract users trying to find a mechanism to transfer funds from person-to-person.

[xvi] 49 C.F.R. § 1540.107 (2016).

[xvii] Tuition Plan Consortium, LLP, SEC No-Action Letter, (Feb. 4, 2003); Fleet National Bank, SEC No-Action Letter (Sept. 5, 1990); Michigan Funeral Directors Association, SEC No-Action Letter (Sept. 28, 1987).

[xviii] Securities and Exchange Commission, Statement of the Commission Regarding Trading Stamps, 23 Fed. Reg. 498 (Jan. 21, 1958).

[xix] Id.

[xx] Anzhela Knyazeva, SEC Division of Economic Risk Analysis, Regulation A+: What Do We Know So Far? (Nov. 2016), https://www.sec.gov/files/Knyazeva_RegulationA%20.pdf.

[xxi] StartEngine Crowdfunding, Inc., Offering Statement (Form 1-A/A) (Mar. 7, 2019).

[xxii] StartEngine Crowdfunding, Inc., Offering Statement (Form 1-A/A) (Jun. 29, 2018); Max Dilendorf, Rika Khurdayan and Gleb Zaslavsky, Another Year in Review: Current State of Reg A+ Tokenized Offerings, Dilendorf & Khurdayan LLP (Mar. 14, 2019), https://dilendorf.com/resources/another-year-in-review-current-state-of-reg-a-tokenized-offerings.html.

[xxiii] StartEngine Crowdfunding, Inc., Offering Statement (Form 1-A/A) (Mar. 7, 2019).

[xxiv] 17 C.F.R. §§ 230.504-506.

[xxv] 17 C.F.R. § 230.506(b) (2013).

[xxvi] 17 C.F.R. § 230.506(c) (2013).

[xxvii] 17 C.F.R. § 230.902 (2005).

[xxviii] Id.

[xxix] See Offshore Offers and Sales, Securities Act Release No. 33-7505, 63 Fed. Reg. 9632 (Feb. 25, 1998).

[xxx] Statista: The Statistics Portal, https://www.statista.com/outlook/264/109/event-tickets/united-states (last visited Apr. 9, 2019).

[xxxi] U.S. Gen. Accounting Office, GAO-18-347, Event Ticket Sales: Market Characteristics and Consumer Protection Issues, at 6, (Apr. 2018), https://www.gao.gov/assets/700/691247.pdf.

[xxxii] Blockchain for Ticketing: A Complete Guide, https://www.eventmanagerblog.com/blockchain-ticketing (last visited Apr. 9, 2019).

[xxxiii] Securities and Exchange Commission, Statement of the Commission Regarding Trading Stamps, 23 Fed. Reg. 498 (Jan. 21, 1958).

[xxxiv] The Ticket Reserve, Inc., SEC No-Action Letter (Sept. 11, 2003).

[xxxv] Id.

[xxxvi] San Francisco Baseball Associate L.P., SEC No-Action Letter (Feb. 24, 2006); Lawrence B. Rabkin, Letter to Securities and Exchange Commission regarding “San Francisco Giants Charter and Club Seat License Program” (Feb. 2, 2006), https://www.sec.gov/divisions/corpfin/cf-noaction/sfba-020206-incoming.pdf.

Written by:

King & Spalding
Contact
more
less

King & Spalding on:

Readers' Choice 2017
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:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.