Small Deals Securities Regulation

Small Deals Securities Regulation

Small Deals Securities Regulation – It seems that just about everywhere I look, someone is offering some type of cannabis-related investment, particularly small investments. The issue that scares the crap out of me…and it doesn’t matter if the investment opportunity is good or bad is the LACK of awareness, let alone compliance with the laws that govern securities regulation.

Let’s limit the discussion to non-public offerings, and I am going to use California law as an example since it is what I know…just about every state has something similar.

Securities issued in California must either be exempted or qualified. You can rely on the limited offering exemption provided by Corporations Code section 25102(f) if you meet all of the requirements in that section. To claim this exemption, a Limited Offering Exemption Notice “LEON” must be filed.

The Limited Offering Exemption Notice can be filed here. The Self-Service DOCQNET Portal found on DBO’s website allows filers to file the exemption notice and pay the required fee online.

There are four requirements to claim the Limited Offering Exemption Notice pursuant to Corporations Code section 25102(f). –

  • Sales of securities are limited to no more than 35 unaccredited investors, including those located outside California,
  • Each investor is required to have a pre-existing business or personal relationship with the issuer of the securities, or, in the alternative, can be demonstrated to be a sophisticated investor,
  • advertising of the securities is prohibited, and
  • at the time of purchase, the investor must not intend to resell the securities.

The Limited Offering Exemption Notice must be filed within 15 calendar days after the first sale of a security in California or within 15 business days after discovery of the failure to file the notice or after demand by the commissioner, whichever occurs first. The notice may be filed in advance of the first sale of a security.

What happens if you advertise the investment opportunity…such as in a local newspaper, or perhaps in an online forum?

The advertisement could jeopardize the availability of the Limited Offering Exemption Notice exemption pursuant to Corporations Code Section 25102(f). The possible absence of the required pre-existing relationship or sophistication on the part of those who respond to the advertisement could also be a problem. If you rely on the 25102(f) exemption and one or more of the requirements are not satisfied, the exemption would be lost and each investor would be statutorily authorized to rescind his or her investment.
You can find more information here

An attorney’s advice is usually a good idea for this stuff…retain one…we have relationships with some very high-quality attorneys if you need a referral

Small Deals Securities Regulation

Author: abizcannabis

Managing Director & CEO of integrated transactional financial advisory, tax, and technology consulting firm - aBIZinaBOX Inc New York, Chicago, and OaklandCPA.CITP.CISM.CGEIT.CGMAExpertise with: Alt. Investments/Private Equity, Real Estate, Professional Services, CA Cannabis, Tech Start-Ups and Distressed Assets/DebtTechnology Certifications including:Advanced & High Complexity Cloud Integrator AICPA PCPS, CAQ,, IMTA, CITP ISACA CGEIT, CISMState CPA Societies in California, Florida, Illinois, New York and TexasExpertise with Regulatory Compliance - US - HIPAA, FINRA, SEC Rule 17(a)(3)/(4), eDiscovery, FINCEN - EU- EBA, ESMA, EIOPA UK - BoE, PRA, FCA