Full Text of Dodd Bill

You can find the full text of the Dodd bill here.

Sections 412 and 926 are relevant to the startup community and in general largely preserve the existing legal framework:

  • Federal preemption of state regulation of all accredited investor offerings remains the rule;
  • No 120 day wait period for a filing with the SEC will be required (as originally proposed in the Dodd bill); 
  • The SEC is being instructed to adjust the net worth standard for an accredited investor to exclude the value of primary residences; and
  • In Section 926, the SEC is being instructed to issue rules for the disqualification of offerings and sales of securities under Rule 506 that “bad actors” are involved in.
Posted in Federal Law & Regulation | Tagged , , , , | 2 Comments

Health Care Reform: What Small Businesses Need to Know Now

Thursday, May 27, 2010
7:30 – 9:00 a.m.
Bellevue Chamber of Commerce
302 Bellevue Square
Bellevue, Washington

Health care reform is here!  Every employer needs to know how the new law will change the way in which health care is provided and how to cope with the new rules.  Many new requirements will become effective later this year—others will take effect over the next several years.

This program will summarize the most important provisions of health care reform that affect small businesses.  Topics to be discussed will include who must be covered under a plan, the small business tax credit, new tax reporting and employee disclosure requirements, new coverage requirements, new patient protections and cafeteria plan changes.  Special emphasis will be placed on changes that affect employers in the near future.

Speakers: Jeff Belfiglio, Liz Deckman and Monica Gianni of Davis Wright Tremaine LLP

$10 per person
Seating is limited, reservations are required

Register online at www.bellevuechamber.org or call 425.213.1205


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Loophole in Angel Investor Amendment: No 4-Year Review of Reg D “Accredited Investor” Definition After All?

by William Carleton, Joe Wallin and Marcus Williams

Is there a loophole in the “Angel Investor Amendment” just passed this week by the Senate? If so, was it intended, or does it reflect a last-minute mistake?

There are different definitions of “accredited investor” at issue here. One applies to securities offerings that are exempt from registration requirements under Section 4(6) of the Securities Act. Another applies to Reg D offerings, which fall under the Securities Act Section 4(2). Although Section 4(6) exempts offerings that are made exclusively to accredited investors, startups don’t use it, in part because offerings under that exemption are limited to $5,000,000, and in part because an issuer relying on that exemption must also perfect a state Blue Sky exemption or undergo merit review by the securities commissioner in each state in which the offering takes place.


To put a point on it, the “accredited investor” definition that is used for Reg D offerings is the one that matters to startups.


Well, as we previously reported (in a post published both here on Joe’s blog and here on Bill’s blog), the amendment that saved startup seed financing and angel investing in America, passed in the Senate by voice vote on May 17, 2010 (SA 4056), changed only slightly from what Senator Bond of Missouri had introduced the prior week (SA 4037).


But one of those slight changes was to suddenly distinguish between the “accredited investor” definition for purposes of 4(6) offerings, and the “accredited investor” definition under Reg D. Sen. Bond’s prior amendment made no such distinction; it treated both definitions in the same way.


Alan Parness pointed this out on Broc Romanek’s blog:

“Section 412(b)(2) [in SA 4056, the version of the amendment that actually passed,] mandates that the SEC undertake reviews of the definition every 4 years thereafter, but solely as regards the definition of the term in 17 CFR Sec. 230.215 (Rule 215 under the ’33 Act for purposes of the definition of “accredited investor” in Section 2(a)(15)(ii) and, in turn, the Section 4(6) exemption), but not as regards the definition in Rule 501(a) of Reg. D. The version of Section 412 in SA 4037 made no such distinction between the rules.”

In short, whether intentionally or by mistake, the financial regulatory reform bill passed by the Senate does NOT appear to require a review of the Reg D accredited investor definition every four years — only of the definition that applies to the Section 4(6) exemption.
Here’s a summary of precisely what the amendment does, with respect to the Reg D accredited investor definition:

  • mandates an immediate change in both accredited investor definitions, to exclude the value of one’s principal residence from the net worth threshold of $1 million;
  • contemplates (but does not require) that the SEC may review the definition as a whole (including, presumably, the annual income requirements); and
  • requires that there be no adjustments to any accredited investor definition that raise the net worth threshold in excess $1 million, less the value of one’s principal residence, for a period of four years.
We are staying tuned to see if the House-Senate conference committee revisits this distinction.

Posted in Financings | Tagged , , , , | 2 Comments

Deal Making: How to Prepare For, Initiate, and Close a Deal

Tuesday, May 25, 2010
4:00 – 6:30 p.m.
Davis Wright Tremaine LLP
1201 Third Avenue, Suite 2200
Seattle, WA 98101

The first session in this two part series will examine the critical steps that a company should take in deciding it wants to pursue a strategic transaction and how to prepare for and start that process.

A panel of leading experts with decades of practical experience will discuss this and related topics, and answer your questions. This topic is particularly timely as deals are coming back to life after the market downturn.

Ty Graham, Operating Partner, Ignition Capital
Clayton Lewis, Partner, Maveron
Kurt Shintaffer, Co-founder and CFO, Apptio
Jonathan Sposato, CEO, Picnik

Hosted By:
Warren Gouk, Managing Director, Cascadia Capital LLC
Taft Kortus, Partner, Moss Adams LLP
Dan Waggoner, Partner, Davis Wright Tremaine LLP

Click here to register

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Washington State Agency Aggressively Joins in Challenges to Status of Independent Contractors; Announces “ESD is on your tail!”


By Nigel P. Avilez and Michael J. Killeen

 In 2009, Washington state’s Employment Security Department (ESD) paid out nearly $4 billion in unemployment benefits, setting a state record for unemployment claims. This compares to $1.2 billion in 2008 and $725 million in 2007.1 With the increased demands for benefits, Washington, like other cash-strapped states and the federal government,2 is trying to increase payroll tax collections by aggressively challenging independent contractor classifications, tax rates and reporting.

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