Investors

Best Practices for Emerging Brands: How to Avoid Missteps

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May 30, 2023
Emerging brands face many choices and obstacles as they get up and running, but making the right choices can ensure smoother growth and dispute resolution. Craig Tractenberg suggests that emerging brands choose LLC formation for its flexibility in capital rights, structure, and tax treatment. Regardless, the legal structure needs to address investors’ needs for returns and a voice in the company as well as allow for growth. Emerging brands should also be sure to shop for money carefully, as SBA financing, crowdfunding, and traditional bank financing all have their own pros and cons. Lastly, to avoid unnecessary disputes, they should get in the habit of documenting everything and relying on the right professionals—whether accountants or lawyers—who can save them money (and sanity).

Defense Bar Commentary Highlights Practice Points for Biotech Securities Litigation

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A panel of corporate advisors updated their 2017 survey of securities litigation involving development-stage biotech companies, providing important practice points for the institutional investor and concluding that biotech start-ups do not pose a greater securities class action risk compared to other companies. Stronger cases involved plaintiffs making credible allegations that defendants intentionally misrepresented data or facts about their interactions with the FDA, omitted adverse regulator feedback, or presented misleading information about regulatory milestones or assessments.

New Climate and ESG Disclosures Are Likely: Are Federal Grant and Loan Recipients the Next Targets?

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: Elizabeth Lange discusses the Biden Administration signaling potential for enhanced ESG disclosures, and how increased and broadened disclosures could affect the way companies do business with the federal government in the future.

SEC Proposed Exemption Provides Regulatory Clarity For Unregistered Finders

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On October 7, 2020, the Securities and Exchange Commission (SEC) voted to provide much needed clarity to the regulatory status of so-called “finders” who assist small businesses in raising capital. In a 3-to-2 vote, the SEC proposed a Finder exemption to the broker-dealer registration requirements of Section 15(a) of the Securities Exchange Act of 1934 to allow unregistered natural persons, referred to as finders, to engage in certain limited activities to assist issuers in raising capital from accredited investors.

SEC Expands the Definition of Accredited Investor

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SEC rules governing accredited investors are designed to protect individual investors from risks that could result from the lack of regulatory oversight associated with unregistered private securities offerings. By expanding the definition of “accredited investor,” the SEC has provided more investors with the opportunity to access alternative investments and given companies, private-equity firms, and hedge funds access to a larger pool of investors.

SEC Disgorgement Lives to See Another Day After Supreme Court’s Liu v. SEC Ruling

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US Supreme Court

On June 22, 2020, in Liu v. SEC, the Supreme Court affirmed in an 8-1 ruling that the Securities and Exchange Commission may continue to pursue disgorgement awards under the federal securities law provided that the award is capped at the defendant’s net profits, and further, provided that the award is made for the benefit of wronged investors. In so holding, the Court struck a middle ground by narrowly preserving one of the most powerful enforcement mechanisms available to the agency but limiting the awards more closely than the awards the SEC has sought over the years.