On June 19, 2015, real estate developers have a new avenue for raising funds. They no longer have to knock on banks doors and pay interest and provide personal guarantees, sign commercial documents pledging their homes, real estate or their business equipment, comply with Regulation D and Rule 506, or use their own finances. They can issue stock or partnership interests directly to the public without every investor having to be “accredited.”

The JOBS Act directed the SEC to adopt rules adding a class of securities exempt from the registration requirements of the Securities Act for offerings of up to $50 million of securities within a 12-month period. In March of 2015, the SEC finally released its final rules to comply with the JOBS Act.

The new rule is commonly referred to as Regulation A+ and divides offerings into two tiers: Tier 1, for securities offerings up to $20 million; and Tier 2, for offerings up to $50 million. Tier 1 offerings are not fully exempt offerings and they still remain subject to registration under state securities laws. Therefore, Tier 2 offerings are the subject of this article.

Continue Reading Real Estate Developers Interested in Offering Equity or Debt for New Projects under Regulation A+

Companies subject to The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010, and the Securities Exchange Act of 1934, are on notice: the SEC is prosecuting violations of Section 21F-17 of the Exchange Act, which prevents companies, through the use of confidentiality agreements, from impeding the ability of whistleblowers to report potential securities violations to the SEC. On Wednesday, April 1, 2015, the SEC announced its first enforcement action against a company for using restrictive language in its confidentiality agreements which had, or could have, a chilling effect on protected whistleblower conduct. In In the Matter of KBR, Inc., Administrative Proceeding File No. 3-16466, the SEC commenced a cease and desist proceeding pursuant to Section 21C of the Exchange Act for the purpose of entering a Cease-And-Desist Order against KBR, Inc., a public company regulated by the SEC, whereby KBR agreed to undertake certain remedial action, including the amendment of its confidentiality agreements and payment of a civil penalty of $130,000.00 to the United States Treasury in accordance with Section 21F(g)(3) of the Exchange Act.

Through its investigation of KBR, the SEC learned that KBR, like many publicly traded companies, maintained a compliance program which monitored and responded to employee complaints about potential illegal or unethical conduct, including potential violations of federal securities laws. In its internal investigation process, KBR implemented a confidentiality agreement which KBR required its employee witnesses to sign upon being interviewed. In relevant part, the confidentiality agreement used by KBR prohibited the employee from “discussing any particulars regarding this interview and the subject matter discussed during the interview, without the prior authorization of the Law Department.”

Continue Reading A New Concern about Confidentiality Agreements: Whistleblower Protection and Anti-Retaliation Emphasized and Enforced by the SEC