Comments on: “Ask the Attorney” – Securities Laws

By: Jilinqueensu

Jilinqueensu — Wed, 03 Aug 2011 03:05:00 +0000

Have a nice trip~

Btw, you have really done a great job. The website is quite useful. Thanks so much!

By: Scott Edward Walker

Scott Edward Walker — Wed, 03 Aug 2011 03:05:00 +0000

I will be out of the office on vacation until August 11th and will have limited access to email until such date. If you need immediate assistance, please contact my colleague Terry Thomas (at tthomas@walkercorporatelaw.com) or Howard Kern (at hkern@walkercorporatelaw.com). Thank you.

By: Jilinqueensu

Jilinqueensu — Mon, 01 Aug 2011 09:02:00 +0000

Hi Scott,

I really wonder that SEC has a record of all accredited investors or not. I am doing some research on angel investors and I want to know how many angels are accredited investors and how many angels are non-accredited angels. Where can I get these data?

Thanks a lot and look forward for your replying

Lin

By: Scott Edward Walker

Scott Edward Walker — Mon, 01 Aug 2011 09:02:00 +0000

By: Scott Edward Walker

Scott Edward Walker — Wed, 15 Jun 2011 17:01:00 +0000

I assume the CPO will require only accredited investors.

By: David

David — Wed, 15 Jun 2011 16:51:00 +0000

Thank you Scott. I appreciate the response.

So, even if the CPO does not require accredited investors- the partnership cannot form without each one being accredited? Interesting. I wouldn’t of thought that was the case. Figured it more or less an issue with the CPO’s requirement. I’m disappointed, but I guess I shouldn’t be surprised.

Thank you

By: Scott Edward Walker

Scott Edward Walker — Wed, 15 Jun 2011 16:18:00 +0000

Yes, each of the partners must be accredited investors. Thanks.

By: David

David — Wed, 15 Jun 2011 16:10:00 +0000

Scott,

I realize this is a really old post. Hopefully you are still reading these comments.

I found this post via a google search. I’m not sure if our situation is applicable (it probably is), but I thought I would ask.

There is a CPO (commodity pool operator – that trades commodities/futures) that I am very interested in investing in. The minimum investment is more than I can do alone. However, I can pool together a group of people to meet the minimum. The idea was to get a lawyer and form a partnership. After the entity is formed and our money is in the account, the partnership itself invests in the CPOs fund.

Now, I’m wondering if each of us in the partnership have to be accredited investors? Ignoring for a moment whether the CPO requires accredited investors or not. Do we, in order to form this partnership need to be accredited? Does this even fall under the SEC rules? I’m not really clear on where the divide is.

Maybe the only requirement is whether the CPO requires an accredited investor or not?

I thought this was a brilliant idea (forming a partnership of equally interested parties), however, now I’m wondering if we are going to run into SEC laws that we weren’t aware of.

Thanks

By: Scott Edward Walker

Scott Edward Walker — Mon, 01 Feb 2010 11:00:50 +0000

Good luck.

By: Celestino

Celestino — Mon, 01 Feb 2010 10:50:53 +0000

Thank you so much for your help. I'll keep that in mind when raising funds from angel investors.

By: Scott Edward Walker

Scott Edward Walker — Mon, 01 Feb 2010 04:00:50 +0000

Good luck.

By: Celestino

Celestino — Mon, 01 Feb 2010 03:50:53 +0000

Thank you so much for your help. I'll keep that in mind when raising funds from angel investors.

By: Scott Edward Walker

Scott Edward Walker — Sat, 30 Jan 2010 03:01:11 +0000

Thanks for your question, Celestino. The introductory language to the definition of “accredited investor” under SEC Rule 501 provides that any person who falls within one of the eight categories or who the issuer “reasonably believes” falls within one of the categories is an accredited investor. The term “reasonably believes” is a factual determination, and the steps that must be taken to establish reasonable belief varies with the circumstances of each offering. Some securities practitioners recommend that the issuer require investors not only to represent and warrant that they are accredited investors in a subscription agreement (or other document), but also to execute a questionnaire — so that the issuer can indeed satisfy the “reasonable belief” standard.

By: Celestino

Celestino — Sat, 30 Jan 2010 01:21:03 +0000

What if an investor signs a document to self-certify that he's accredited? Does the SEC go back to check whether such individual is indeed accredited when it's time to exit?

By: Scott Edward Walker

Scott Edward Walker — Wed, 13 Jan 2010 14:24:11 +0000

Yes, I think a new entity could be created which acquires the existing entity; however, I don't think that will solve their money problems. As I noted in the post, unless you are raising funds from “accredited investors,” compliance with the securities laws is both tricky and expensive. Many thanks.

By: Adnan

Adnan — Wed, 13 Jan 2010 12:47:48 +0000

What about dissolving the current partnership and creating a new one with the friends? Could a new entity be created with the friends which acquires the existing entity? As a bootstrapper myself, not all of potential sources of funding are “accredited”.