This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: SEC Rule on Advertising May Be Too Tough for Startups

"These businesses and their related parties, including owners and employees, may be very good at operating their companies but are certainly not steeped in securities laws," Purcell wrote.

Requiring them to prefile "every Facebook like, every Tweet, every Pinterest, every mention in a post or comment on a LinkedIn forum, or every handwritten sign they may place in the reception area of their businesses is simply not practical," he stated. "Even with the best of intentions, it is not reasonable to expect that the rule will be complied with by these small issuers.

And even if it were, the millions of postings would likely overwhelm any database that the SEC creates for such a purpose." Purcell said that the SEC should provide an exemption from the rule for offerings by business issuers raising less than $5 million, or it should create a separate standard for funds, differentiated from businesses capital raising directly to grow and create jobs.

"There's no way a startup can digest all this," said Jason Crawford, the 33-year-old co-founder of tech startup Kima Labs. It raised $770,000 from angel and seed investors including his parents in 2010 before selling itself to Groupon Inc. in 2012 for an undisclosed amount. Kima Labs made iPhone apps, including one called Barcode Hero, which allowed users to scan the barcodes of products, comment on them and view other users' comments.

"The securities laws are so complex," Crawford said. "No one understands them except the experts. I'm lucky because I work with good lawyers," he continued. "It's probably going to lead to extra legal expenses, but I'll be able to avoid penalties and major problems. I worry about the guys who can't afford a good lawyer. Good luck trying to do it yourself."

Crawford said he supports an exemption for the smallest tech startups to allow them to avoid the filing requirements. "There are a lot of areas where the filing requirements could be lessened," he said. Mitchell Littman, a partner with the law firm of Littman Krooks LLP in New York, said he was surprised people are so concerned about the new filing requirements because it is premature to say for sure how the new rules will affect raising capital.

3 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
FB $78.81 0.00%
AAPL $128.70 0.00%
GOOG $540.78 0.00%
TSLA $230.51 0.00%
YHOO $42.04 0.00%

Markets

DOW 18,070.40 +46.34 0.26%
S&P 500 2,114.49 +6.20 0.29%
NASDAQ 5,016.9290 +11.5380 0.23%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs