Less Than Zero: In Defense of the Tenth Circuit’s Opinion In United States v. Strandlof

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Sherry Metzger*

Introduction

In July 2010, Rick Strandlof was charged under the Stolen Valor Act (SVA), which makes it illegal to “falsely [represent oneself], verbally or in writing, to have been awarded any decoration or medal authorized by Congress for the Armed Forces of the United States”[2] The District court for the District of Colorado declared the SVA facially unconstitutional, reasoning that false statements are generally protected by the First Amendment[3] unless they fall within one of the narrow categories of speech, such as fraud or defamation, that have been held as exceptions.[4] The United States Court of Appeals for the Tenth Circuit, recognizing that the Supreme Court has observed time and again that false statements of fact do not enjoy constitutional protection, held that the SVA does not infringe protected speech and vacated this opinion and judgment.[5] The Court decided the case while a parallel case, United States v. Alvarez[6]  was under review by the Supreme Court.[7]

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Walking in Your Footsteps: The Protection of Paleontological Resources in Colorado

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Lynda Knowles†

I.          Introduction

This article addresses laws regarding fossil collection within Colorado and discusses a few notable cases. While fossils discovered on private lands belong to the landowners, federal and state laws require permits to collect or excavate for paleontological resources on public lands.[2] As the illicit trade in fossils grows, public outreach and education will serve as important bulwarks highlighting the unique scientific and cultural value of these treasured resources.   

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Crowdfunding and Using Net Worth to Determine Investment Limits

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Lindsey Anderson Smith*

Introduction

President Obama signed into law the Jumpstart Our Business Startups Act ("JOBS Act") on April 5, 2012.[1] Title III of the Act, the Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act,[2] amended Section 4 of the Securities Act of 1933 (“1933 Act”) to exempt capital raising crowdfunding from registration.[3] Crowdfunding targets unaccredited investors primarily through offerings over the Internet. The provision reduces traditional protections under the securities laws but imposes an annual cap on the amount investors can invest (and lose).

These investment caps are computed on a sliding scale based upon the individual investors’ income or net worth. The caps, however, raise a number of concerns. For one thing, their enforcement will be difficult. Under the JOBS Act, Internet portals are required to monitor investments to ensure that investors do not exceed these limits.[4] Nonetheless, there is no centralized system for organizing and maintaining accurate investment records among investors. 

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The Jumpstart Our Business Startups Act and the Elimination of the Ban on General Solicitations

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Erica Siepman*

Introduction

The Jumpstart our Business Startups Act (“JOBS Act”) sought to ease the regulatory burdens of capital raising for America’s small businesses and entrepreneurs.[1]  Congress passed the bipartisan JOBS Act legislation on March 27, 2012, and President Barack Obama signed it into law on April 5, 2012.[2]

The JOBS Act contains seven titles that each relate to a different aspect of “improving access to the public capital markets for emerging growth companies.”[3]  Title II, Access to Capital for Job Creators, eliminates a long-standing ban on the use of general solicitations and general advertising in the context of some private placements.[4]  Specifically, Section 201(a) requires that the Securities and Exchange Commission (“SEC” or “Commission”) authorize the use of general solicitations under Rule 506 of Regulation D and Rule 144A of the Securities Act of 1933 so long as securities are sold only to accredited investors.[5]  Issuers are, however, required to take “reasonable steps” to ensure sales are limited to accredited investors.[6]

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Crowdfunding and State Level Securities Fraud Enforcement under the JOBS Act

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Michael W. Shumate*

Introduction

President Obama signed the Jumpstart Our Business Startups Act (“JOBS Act”) into law on April 5, 2012.[1] This Act combines a number of pieces of legislation that collectively seek to ease the difficulties inherent in raising capital for start-up companies.  Title III of the Act attempts to create certain exemptions for companies that raise capital through crowdfunding. Crowdfunding typically involves small investments made over the Internet through regulated funding portals. Title III, however, limited the role of states in the oversight of crowdfunded offerings.   

This paper discusses the history of state securities enforcement prior to the adoption of the JOBS Act. The paper will examine the concerns that led to the promulgation of Title III of the JOBS Act, including the decision to limit the oversight role of the states. The final section will discuss the implications of this approach.   

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Regulation A+, the JOBS Act, and Public Offering Lite

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David Rodman*

Companies selling shares must register them with the Securities and Exchange Commission (“SEC” or “Commission”).[1] The Securities Act of 1933 (“1933 Act”) contains a number of exemptions from registration,[2] including one for small offerings.[3] Regulation A[4] (“Reg A”, or the “Regulation”) permits unregistered offerings of up to $5 million. [5] The Exemption, however, is rarely used.[6]

Reg A’s unpopularity stems from a number of factors. These include the low ceiling on the amount that can be raised, the applicability of state blue sky laws, and the costs of the required disclosure, including the obligation to file an offering circular.[7] In passing the Jumpstart Our Business Startups Act (“JOBS Act”), Congress attempted to encourage the use of the small offering exemption by adding “Regulation A+ (“Reg A+”).”[8]

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Title I of the JOBS Act: The “On-Ramp” to IPOs for Emerging Growth Companies

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Will McAllister*

On April 5, 2012, President Obama signed into law the “Jumpstart Our Business Startups Act” (“JOBS Act”).[1] The JOBS Act sought to improve access to capital for small businesses in an effort to increase job creation and economic expansion.[2] The Act included seven titles, comprised of six separate bills introduced by five different congressional representatives.[3] This article focuses on Title I: Reopening American Capital Markets to Emerging Growth Companies.

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The JOBS Act: Does the Income Cap Really Protect Investors?

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Lina Jasinskaite*

I. Introduction

The Jumpstart Our Business Startup Act (“JOBS Act”) allows a for-profit business to access equity based financing through crowdfunding.[1]  Crowdfunding generally entails small investments into startup companies from a large group of individuals through offerings over the Internet.[2]  The provision was designed to “get small businesses and entrepreneurs back into the game by removing costly regulations and making it easier for them to access capital.”[3] 

Targeting unaccredited investors,[4] the offerings involve a significant degree of risk, including an increased potential for fraud.[5]  The legislation sought to address some of these concerns through the imposition of an annual investment cap.[6]  Expressed as a percentage of income or net worth,[7] the cap was set too high to serve as an adequate protection for investors.  In particular, the JOBS Act mandated that the Commission apply the definition of income from the accredited investor standard,[8] a provision with an entirely different purpose.  

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The JOBS Act: Exempting Internet Portals from the Definition of Broker-Dealer

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Samuel Hagreen*

President Obama signed the Jumpstart Our Business Startups Act (“JOBS Act” or the “Act”) on April 5^th, 2012.[1]  The Act sought to ease the regulatory burden of capital raising on startups and smaller companies to encourage economic growth.  Title II specifically included an exemption from broker-dealer registration for internet portals used to market shares sold in private placements under Rule 506 (“Portal Exemption”).

Attention has mostly focused on the JOBS Act provision that exempted crowdfunding portals from broker-dealer registration.  In fact, the exemption for portals marketing shares sold in offerings under Rule 506 may well have a broader impact.  Moreover, the regulatory requirements for the two types of portals vary considerably because of differences in the sophistication of the investors purchasing the securities. 

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JOBS Act Title V: Raising the Threshold for Registration

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Susan Beblavi*

I. Introduction

Congress adopted the Jumpstart Our Business Startups Act (the “JOBS Act”) on April 5, 2012.[1] According to the preamble, the JOBS Act will “increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies.”[2] The Act sought to accomplish this goal by alleviating the regulatory burdens surrounding capital raising. 

Title V of the JOBS Act amends Section 12(g) of the Securities Exchange Act of 1934 Act (the “Exchange Act”).[3] The amendments raise the threshold number of shareholders required to trigger securities registration requirements with the Securities and Exchange Commission (“SEC”).[4] Registration has significant consequences. Registered companies must file periodic reports, adhere to the proxy rules, prohibit short swing profits, and comply with other requirements of the federal securities laws.[5] These provisions protect investors but also add significant cost to a company’s operations. 

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