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A New Trend in Securities Fraud: Punishing People Who Do Bad Things
This article seeks to articulate a distinct view of federal securities law as it is increasingly used in non-traditional enforcement actions commenced to punish corporate bad behavior. This paper argues that these non-traditional enforcement mechanisms should be viewed with skepticism. This skepticism should not be misinterpreted as cynicism, as the author believes that these non-traditional enforcement actions are beneficial vehicles to accomplish the admirable governmental objective of “punishing people who do bad things.” However, the author recognizes that such use of securities law does not fall into a category of clearly defined criminal law and carries a significant risk of abuse. The author also recognizes the “admirable governmental objective” may be thwarted when it comes to private companies. Finally, the author is uneasy with the societal values conveyed when the government sanctions corporate misbehavior in the name of protecting shareholders from deception.
Audit Response Letters and Reserve Issues
The Sarbanes-Oxley Act of 2002 (H.R. 3763) (“SOX”) was enacted as a means to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws. SOX and the rules enacted thereafter affect how issuers of securities make disclosures, the protocols auditors use to audit their financial statements, and how lawyers respond to auditor requests for information regarding issuer loss contingencies. Among other things, SOX amended the Securities Exchange Act of 1934 (the “1934 Act”) and the Securities Act of 1933 (the “1933 Act”). Although SOX does have some specific provisions, and generally establishes some important public policy changes, it has been implemented in large part through rules adopted and to be adopted by the Securities and Exchange Commission (“SEC”) and the Public Company Accounting Oversight Board (“PCAOB”), which have impacted auditing standards and have increased scrutiny on auditors’ independence and procedures to verify company financial statement positions and representations. Further, while SOX is by its terms generally applicable only to public companies, its principles are being applied by the marketplace to privately held companies and nonprofit entities.
Choice of Entity and Tax Considerations
Byron Egan compares Texas and Delaware law relating to different kinds of business entities, including across taxation, management, fiduciary duty, business combinations, indemnification, piercing the corporate veil, allocations, distributions, and joint ventures among entities.
Venture Capital: Funding a New or Growing Business
Although early-stage companies have numerous potential paths, many founders simply start with an innovative idea, apprehension about the immediate next steps, and big dreams about building a successful business. Only a select few will cash in on a massive exit or other sale transaction. While some companies initially can survive using the founder’s own money, many companies – especially high-growth potential companies (which are the focus of this article) – need significant investment capital to turn ideas and dreams into a real business. Success or failure in the early-stage financing process often is a keystone on which a high-growth potential company’s future depends. There are many variables to early-stage financing, and missteps during the process can haunt a company throughout its lifespan. When an early-stage company conducts this process in accordance with established norms, we have found that, among other things, financing tends to close quicker, valuations remain intact, and founders have better options for subsequent fundraising rounds.
Acquisition Finance: Loan Market Trends in the Energy Sector
“Acquisition Finance” involves the interaction of two separate but related transactions. First, there is a purchase and sale of an asset or legal entity between a buyer and a seller that is evidenced by a purchase and sale agreement (the “PSA”). Second, there is a financing arrangement between a borrower (i.e., the buyer) and one or more financing providers that is evidenced by a credit or loan agreement, the proceeds of which are used to finance the acquisition (the “Financing”). In order to fully appreciate the current loan market trends in the acquisition finance space, it is important to know how the market has evolved in recent years.
Shareholders Agreements: Drafting and Analysis
Under the Texas Business Organizations Code (the “TBOC”), there are three kinds of shareholders agreements for a Texas for-profit corporation. First, there are shareholders agreements between the corporation and one or more of the corporation’s shareholders or agreements between two or more shareholders that are not executed by all of the shareholders of the corporation. The TBOC has no specific provisions governing this first kind of shareholders agreements other than to state that the statutory provisions governing the other two kinds of shareholders agreements do not prohibit or impair such agreements. Second, there are written shareholders agreements that are executed by all of the shareholders at the time of the agreement and made known to the corporation. Third, there are shareholders agreements that are contained in the certificate of formation or bylaws if approved by all of the shareholders at the time of the agreement. The latter two forms of shareholder agreements are authorized and governed by Subchapter C of Chapter 21 of the TBOC. These latter agreements may be amended only by all of the shareholders at the time of the amendment, unless the agreement provides otherwise. This article refers to the latter kinds of shareholders agreements as “statutory shareholders agreements”.
Securities Law Basics
This article is about securities law, particularly federal and state statutory law, the consequences for ignoring securities laws, and applying the law to unincorporated entity interests.
Regulation D Private Offering Exemptions Under the Securities Act of 1933
Raising capital is a vital necessity for companies across the industry spectrum, from innovative start-ups to well- established institutions, from small businesses to mega corporations. Capital fundraising efforts, absent a wealthy founder or benefactor, can be difficult, time consuming, and expensive. On the scale of corporate viability, a business’s capital needs, and the manner it must seek to acquire it, must balance with investor protection, access to information, and transparency – the heart of the Securities Act of 1933 (the “Securities Act”). Large-cap companies can launch public offerings with relative ease to serve their needs, but small and mid-size companies generally cannot and must seek other avenues for their capital raising efforts. The Securities Act, and the rules and regulations derived therefrom, can provide the guiding pathway for these entities to engage an investor base to fund their business while exempting out of the cumbersome registration process. There are a multitude of exemptions available under the Securities Act, but the most prevalent are those found under Regulation D, commonly known as the private placement exemptions.