Securities Law Compliance

We provide legal counsel to entrepreneurs, founders, startups, investors, shareholders and established companies in connection with various securities and securities-related transactions, including:

  • Founder Stock Issuances
  • Employee Stock Purchase Agreements
  • Stock Option Plans and Agreements
  • Seed Financings
  • Angel Investments
  • Venture Capital Financings
  • Bridge Financings
  • Private Placements
  • Mergers, Acquisitions and Dispositions
  • Stock Transfers and Gifts
  • Stock Redemptions and Repurchases
  • Stock and Option Record-Keeping

We also have significant experience with public offerings and ongoing compliance requirements for public companies and their directors, officers, and employees.

Compliance with federal and state securities law requires an understanding of a number of complex statutes and their associated regulations.  We have extensive experience with the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the California Corporate Securities Act of 1968, other state securities laws (known as “blue sky” laws), and NASDAQ and NYSE listing and compliance rules.

Every issuance of stock, LLC interests or other securities in the United States must comply with federal and state securities laws and associated securities regulations. The compliance requirements apply to issuances to founders, employees, consultants, investors and partners. Certain issuances, including most public offerings, require registration with the U.S. Securities and Exchange Commission.  Other issuances, including most offerings by privately-held companies, must comply with the requirements for a valid exemption from registration and prospectus delivery requirements.  The California Department of Corporations, which has offices in Los Angeles, Sacramento, San Francisco and San Diego, regulates the issuance of securities in California by corporations, limited liability companies, limited partnerships and other entities.  Virtually all issuances of securities in California (other than registered public offerings) require a filing or qualification with the Securities Regulation Division of the California Department of Corporations.  Every state has its own specific requirements regarding the issuance of securities.

We assist companies with securities transactions involving investors and employees throughout the United States.  Links to information about federal and California securities regulation can be found on our Resources page.

The issuance and transfer of securities is subject to numerous requirements and restrictions. Failure to comply with securities law and related requirements and limitations can result in civil and criminal enforcement penalties, private litigation, and the inability to complete a financing or other transaction. Therefore, it is critical that companies confer with counsel before beginning any fundraising efforts or other securities-related transactions.  For instance, advertising for investors is prohibited in almost all cases, including interviews or articles in which a company representative mentions that the company is raising funds.  This prohibition on general solicitation extends to communication through websites, blogs, seminars, newspapers, magazines, trade publications, radio, television and other forms of wide distribution.  If a company seeks investor leads through these or similar channels, the company will generally be prohibited or restricted from completing the financing as planned and may be subject to penalties from state and federal securities authorities.  We counsel companies and their representatives what means of communication are permitted when raising capital.

Issuing securities is also subject to specific disclosure requirements relative to the company issuing shares.  Failing to disclose material information (or providing false or misleading information) concerning the business can subject the company and its representatives to cease-and-desist orders, civil penalties and criminal prosecution for securities fraud.  We advise companies regarding preparation of offering materials intended to satisfy these requirements.

There are other important limitations on raising capital for your business, including restrictions on persons who may invest in privately held companies. In general, it is advisable to approach and obtain funding only from “accredited investors” who meet specific financial suitability requirements under Regulation D of the U.S. Securities Act of 1933.  Limiting an offering to accredited investors reduces compliance costs during the offering and avoids unnecessary complications in connection with future transactions.  We assist companies with the procedures for determination of investor qualification and compliance with applicable regulations.