If you have spent much time around the world of private capital raising, then you know that there are only two avenues for a company that wants to bring on investors. Either you register your capital offering (equity, debt, or some hybrid) or you find a state or federal filing exemption that you can qualify for. In this second post of an ongoing series focusing on cannabis securities, we’re taking a first look at the world of state and federal filing exemptions.
Your Governing Securities Regulators Matter. The federal Securities Exchange Commission (“SEC”) and each state’s securities board, commission, or department has jurisdiction over public and private placement of securities. Their jurisdiction depends on where the company raising investment funds (the “Issuer”) is located, who or what is investing, where the prospective investors live (or where the investing entity is based), and what amount is being invested. To drive this issue home, I always ask my Issuer companies:
What type of securities do you intend on offering? What percentage of the company’s equity will that entail on a fully-diluted basis? (or if it’s a debt offering, what percentage of the company’s total debt will that comprise?) How much total