Easing of restrictions may be on the way for smaller issuers seeking to rely on “finders” to assist with their capital raising efforts.  On October 7, 2020, the U.S. Securities and Exchange Commission (the “SEC”) proposed a new limited, conditional exemption from broker registration requirements of Section 15(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) for “finders” who assist issuers with raising capital in private markets from accredited investors.  If adopted, the proposed exemption would permit natural persons to engage in certain limited activities involving accredited investors without registering with the SEC as brokers.  This proposed exemption might also allow certain existing registered broker-dealers to possibly withdraw their registration as well. The purpose of the proposed exemption is to help smaller businesses raise capital and provide regulatory clarity to the parties involved in such efforts.

The proposed exemption would create two classes of exempt Finders, Tier I Finders and Tier II Finders, and establish clear lanes for both registered broker activity and limited activity by finders that would be exempt from registration.  Tier I and Tier II Finders would be permitted to accept transaction-based compensation under the terms of the proposed exemption, but each would be subject to certain conditions tailored to the permitted scope of their respective activities.

Tier I Finders would be limited to providing contact information of potential investors in connection with only a single capital raising transaction by a single issuer in a 12-month period.  A Tier I Finder would not be permitted to have any contact with a potential investor about the issuer.

Tier II Finders would be able to solicit investors on behalf of an issuer, but the solicitation-related activities would be limited to:

  • identifying, screening, and contacting potential investors;
  • distributing issuer offering materials to investors;
  • discussing issuer information included in any offering materials, provided that the Tier II Finder does not provide advice as to the valuation or advisability of the investment; and
  • arranging or participating in meetings with the issuer and investor.

Both Tier I and Tier II Finders would be subject to the following conditions in order to take advantage of the proposed exemption:

  •  the issuer is not required to file reports under Section 13 or Section 15(d) of the Exchange Act;
  • the issuer is seeking to conduct the securities offering in reliance on an applicable exemption from registration under the Securities Act of 1933 (the “Act”);
  • the Finder does not engage in general solicitation;
  • the potential investor is an “accredited investor” as defined in Rule 501 of Regulation D under the Act or the Finder has a reasonable belief that the potential investor is an “accredited investor”;
  • the Finder provides services pursuant to a written agreement with the issuer that includes a description of the services provided and associated compensation;
  • the Finder is not an associated person of a broker-dealer; and
  • the Finder is not subject to statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act, at the time of his or her participation.

Additionally, because Tier II Finders would participate in a wider range of activity and have the potential to engage in more offerings with issuers and investors, the SEC has proposed additional disclosure requirements and conditions.  These disclosure requirements, which include a requirement that the Tier II Finder provide appropriate disclosures of such Tier II Finder’s role and compensation, must be made prior to or at the time of the solicitation.  The Tier II Finder would also need to obtain from investors a dated written acknowledgment of receipt of the required disclosures prior to or at the time of any investment in the issuer’s securities.  The exemption would not apply to a number of activities, including resales of securities, due diligence, and negotiating terms of an investment.

To read the full proposal, click here.

 


As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

On August 26th, the Securities and Exchange Commission (“SEC”) adopted amendments to the “accredited investor” definition in Rule 501(a) of Regulation D, a key determinant for eligibility to invest in unregistered securities.

The amended definition expands access to private capital markets to a broader swath of potential investors, such as “knowledgeable employees” (with respect to investments in a private fund), those holding certain professional credentials or licenses (Series 7, 65 and 82, Chartered Financial Analysts and others that the SEC may designate from time to time), SEC and state registered investment advisers, exempt reporting advisers, as well as any entity, including limited liability companies, Native American tribes, funds and entities organized under foreign law, that own investments in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered, and family offices (and their “family clients”) with investments of at least $5 million, among others.  The amended definition also adds the term “spousal equivalent” for purposes of clarifying who can pool their finances to qualify as an accredited investor.

Notably, the net worth and income standards for individuals and entities under the definition were not updated – which is interesting given the focus in recent years over updating such amounts to take into account inflation – consistent with the thrust of the current amendments to expand access to investors not only based on their personal wealth, but also based on their level of financial sophistication.

These changes follow decades of growth in private capital markets and are expected to facilitate capital raising for early stage companies and private funds.

These amendments become effective 60 days after publication in the Federal Register.

See this link to the SEC’s press release for more information regarding the amended “accredited investor” definition.

As Delaware operates in Phase 2 of its economic reopening, the following are general guidelines applicable to offices which are not otherwise subject to industry-specific guidance.  The following applies as of June 15, 2020, the date that Delaware began Phase 2 of its economic reopening, as more fully set forth in the Twenty-First Modification of the Declaration of a State of Emergency for the State of Delaware:

  • Employers must enforce strict social distancing protocols.
  • Employers must exclude employees who (a) have been diagnosed with COVID-19, (b) are reasonably suspected to have COVID-19, or (c) have symptoms of COVID-19, such as fever, cough, shortness of breath, new loss of taste or smell, sore throat, aches or muscle pain, chills or repeated shaking with chills. Such employees shall stay home and not come to work until they are until they are free of fever (100.4 °F or greater using an oral thermometer), signs of a fever, and any other symptoms of COVID-19 for at least 24 hours, without the use of fever-reducing or other symptom-altering medicines (e.g., cough suppressants). These employees should notify their supervisor and stay home if they are sick.  Daily health screenings of employees are strongly recommended before work (and mandated for high risk businesses).  Symptomatic employees must not physically return to work until cleared by a medical professional.
  • Employers must prohibit employees who have been told they must be isolated or quarantined from on-premises work until isolation or quarantine status is discontinued by the DPH.
  • Employers are encouraged to continue teleworking. Employees who have been working from home should continue working from home unless there is a substantive change to business operations in Phase 2 (e.g. a business was closed, but now it is open).
  • All surfaces touched by visitors, including doors, seating restrooms, and elevators must be disinfected using an EPA-approved disinfectant every 15 minutes to 2 hours.
  • Hand sanitizer must be used by employees at frequent intervals during any service, appointment or scheduled event, including at a minimum after contact with surfaces touched by others, after incidental contact with a visitor, and before preparing or distributing food or drink.
  • Employees must social distance from each other while working. This can be accomplished through spacing or moving workstations, staggering shifts or other means.
  • Businesses must make hand sanitizer or handwashing stations readily available for all employees, patrons, and visitors throughout the business’ location, including at each entry and exit at a minimum. Hand sanitizer must be composed of at least 60% ethanol or 70% isopropanol.
  • Businesses must stagger appointments or other scheduled gatherings and events to allow for a thorough cleaning and disinfecting according to CDC guidelines of any public spaces before the next appointment or other scheduled gathering or event begins.
  • Employers must post signs on stopping the spread of COVID-19, hand hygiene and wearing cloth face covering.

Additionally, owners of buildings used for commercial offices must adopt policies that, at a minimum, implement the following cleaning protocols:

  • Clean and disinfect high-touch areas routinely in accordance with CDC guidelines, particularly in spaces that are accessible to staff, customers, tenants, or other individuals, and ensure cleaning procedures following a known or potential exposure in a facility are in compliance with CDC recommendations.
  • Maintain cleaning procedures in all other areas of the facility.
  • Ensure that the facility has a sufficient number of workers to perform the above protocols effectively and in a manner that ensures the safety of occupants, visitors, and workers.

As offices reopen, they are required to be compliant with Federal, State and local safeguards for its employees, visitors and operations, and should be guided by requirements and recommendations, as applicable, specified by Delaware Executive Orders, Occupational Safety and Health Administration, Centers for Disease Control and Prevention, and Equal Employment Opportunity Commission.

The above relate exclusively to professional and commercial offices operating in Delaware. As noted, there may be additional and different restrictions and requirements with respect to other industries permitted to be open at this time. While Governor Carney announced on June 25, 2020 that Phase 3 would be delayed in light of concerns about instances of noncompliance in Delaware and surging COVID-19 cases in other parts of the country, it is expected that when Delaware enters Phase 3, restrictions on businesses will be further relaxed. Requirements continue to evolve and we will continue to monitor Delaware’s economic reopening.


As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

On Monday, June 22nd, New York City –reopened to Phase Two businesses – including offices (including law firms, real estate and many other professional services).  New York City is the final region in New York State to have entered this phase which comes three months after the closure of all non-essential businesses under the “New York State on Pause.”  This is part of Governor Cuomo’s plan, called “New York Forward,” to re-open non-essential businesses in New York State on a regional and industry-specific basis as each region meets the criteria necessary to protect public health.

Although this is certainly a positive development, reopening offices under the New York Forward program will not be back to business as usual.  In connection with reopening, Phase Two businesses are required to, among other things, adopt industry-specific guidelines put forth by NYS (the “Guidelines”) and to adopt and conspicuously display a written safety plan that is designed to protect employees and visitors, make the physical workspace safer and implement processes that lower risk of infection in the business.  The Guidelines impose certain mandatory requirements, as well as recommended best practices, covering the following areas: screening, physical distancing (social distancing and limiting occupants to no more than 50% of maximum occupancy of a particular area), personal protective equipment (“PPE”) (e.g., masks), hygiene and cleaning, and communication.  In addition, employers must affirm in a written instrument that they have reviewed and understand the Guidelines and will implement them.

Notably, the Guidelines require employers to take steps to reduce interpersonal contact through various methods, such as limiting in-person presence to necessary staff, reducing on-site workforce, and staggering arrival/departure times.  Although the employer is free to choose the method, it is recommended that employees who can work remotely continue to do so at least for the near future.

Additional requirements under the Guidelines that will noticeably impact life in the office include certain screening measures (discussed further below), closing all non-essential common areas (e.g., kitchens, gyms, game rooms) within the office, posting signage for social distancing throughout the office and in tighter spaces where social distancing is not possible (e.g., elevators, bathrooms), supplying of PPE to employees and requiring that PPE be worn around the office, in elevators and other tight spaces, setting up hand hygiene stations, maintaining cleaning logs, undergoing regular sanitization and disinfection of the office, and prohibiting food sharing among employees (e.g., buffet meals), among other things.

To enable building owners and business to screen entrants, Executive Order 202.38 was passed to allow temperature checks prior to individuals gaining entry into the office, and to permit a building owner or employer or building owner to deny admittance to anyone who refuses a temperature check and whose temperature is above that proscribed by the NYS Dept of Health guidelines.  This is in addition to the mandatory health screening assessment under the Guidelines for employees, contractors and other visitors, that permit temperature checks and questionnaires asking about (1) COVID-19 symptoms in past 14 days, (2) positive COVID-19 test in past 14 days, and/or (3) close contact with confirmed or suspected COVID-10 case within past 14 days, with responses being reviewed and documented daily.  On-site screeners should be trained by employer-identified individuals familiar with Federal, State and local protocols, and should wear appropriate PPE, including a face covering at minimum.

In addition to the foregoing, employers must establish a communication plan for employees, visitors and clients with a consistent means to provide updated information, and maintain a continuous log of every person, including workers and visitors, who may have close contact with other individuals at the workplace, such that all individuals may be identified, traced and notified in the event a worker is diagnosed with COVID-19.  Such communication plan should provide for notification of state and local health departments if a worker tests positive for COVID-19 in cooperation with contact tracing efforts, including notifying potential contacts, such as workers, visitors and/or customers who had close contact with the individual while maintaining confidentiality required by state and federal law and regulations.  The communication plan would also cover the more obvious things, such as that employees who are sick should stay home, or should return home if they become ill at work.

As offices reopen, they should also be guided by requirements and recommendations, as applicable, specified by New York City and by the Occupational Safety and Health Administration, Centers for Disease Control and Prevention, and Equal Employment Opportunity Commission.

The above relates exclusively to professional and commercial offices operating in New York City. There are different restrictions and requirements with respect to those other industries permitted to be open at this time (and some businesses are not yet permitted to be open).  The requirements continue to evolve and we will continue to monitor New York City’s staged reopening.

See the following link for Phase Two office industry-specific guidelines: https://www.governor.ny.gov/sites/governor.ny.gov/files/atoms/files/OfficesSummaryGuidelines.pdf

See the following link for Phase Two office industry-specific written safety plan template: https://www.governor.ny.gov/sites/governor.ny.gov/files/atoms/files/NYS_BusinessReopeningSafetyPlanTemplate.pdf

See the following link for NYC Phase Two office guidelines on re-opening: https://www1.nyc.gov/assets/coronavirus/downloads/phase2/offices.pdf

 

 


As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

Although a few counties and cities of Maryland continue to impose additional restrictions, Maryland, including Baltimore City, has lifted its stay-at-home order and is proceeding with its three stages of reopening as outlined in Maryland Strong: A Road to Recovery. Nevertheless, Maryland encourages those employees who are able to work at home to continue to do so whenever possible.  When working in a professional office, however, Maryland recommends certain best practices.  For office buildings, Maryland recommends the following:

  • Clean and disinfect the offices per CDC guidelines.
  • Open or remove doors where possible to minimize touch points.
  • Remove high-touch shared items or sanitize between uses (e.g., kitchen appliances)
  • Provide automatic hand sanitizer stations near touch points (e.g., elevators).
  • Install automatic soap dispensers in kitchens and restrooms.
  • Rearrange desks and seats in meeting rooms to allow six feet of distancing.
  • Consider designating and posting one-way foot traffic direction signs in main circulation routes.
  • Mark increments of six feet on floors where lines form.
  • Post signs on walls and place stickers on floors of elevators describing where to stand.
  • Open doors and windows for fresh air.
  • Replace air filters more frequently, using the highest filtration level available.
  • Designate one location for deliveries, disinfecting items and restricting to only assigned employees.
  • Encourage the use of face masks.
  • Communicate these precautions to tenants promptly and electronically.

 

For employers offering professional services, Maryland recommends the following:

  • Implement a daily screening process that includes asking employees health questions recommended by CDC and Maryland Department of Health (e.g., did you lose your sense of smell or taste?).
  • Consider temperature testing employees.
  • Instruct sick employees to follow CDC and MDH guidelines regarding home isolation.
  • Conduct telephone or video conferences.
  • Limit attendees at in-person conferences.
  • Consider alternate work hours (e.g., split or staggered schedules)
  • Stagger lunch hours and use of kitchens.
  • Encourage the use of face masks.
  • Encourage distancing of six feet.
  • Communicate these precautions to employees promptly and electronically.

Currently, Maryland has progressed to the second stage.  Hopefully, the implementation of these recommendations will allow Maryland to not only enter into stage three but also finally graduate to business as usual.

 


As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.