What is the JOBS Act and Why Should You Care?

WHAT IS THE JOBS ACTAND

WHY SHOULD I CARE

Part of the Alternative Investment Basics 2015 Series

Premiere Date: June 4, 2015

WHAT IS THE JOBS ACT AND WHY SHOULD YOU CARE

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MEET THE FACULTY

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MODERATOR:Chris Cahill,

Lowis & Gellen, LLP


PANELISTS:Benjamin Alexander, Greenberg Glusker Fields Claman & Machtinger LLPSara Hanks, CrowdCheckHeather Schwarz-Lopes, EarlyShares.com

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Practical and entertaining education for business owners and executives, accredited investors, and their legal and

financial advisors.For more information,

visit www.financialpoisewebinars.comDISCLAIMER:

THE MATERIAL IN THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY. IT SHOULD NOT BE CONSIDERED LEGAL ADVICE. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE

WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.

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©2015

http://www.financialpoise.com/

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ABOUT THIS WEBINARWHAT IS THE JOBS ACT AND WHY SHOULD YOU CARE

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The JOBS Act of 2012 lifted the ban that previously prevented private placements from being advertised and is the law which will soon open up “equity crowdfunding” to millions of Americans. Learn all about the JOBS Act and its implications by attending this webinar.

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ABOUT THIS SERIESWHAT IS THE JOBS ACT AND WHY SHOULD YOU CARE

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The personal investment landscape in the United States is undergoing the greatest transformation since the popularization of the mutual fund. The JOBS Act of 2012 lifted the ban that previously prevented private placements from being advertised. As a result, millions of accredited investors are only beginning to understand that there are investment options available to them that they never before considered. This webinar series was created for those millions of Americans who meet the federal government’s definition of “accredited investor,” to help them decide if some of their investment dollars should be allocated away from stocks, bonds, mutual funds, and the like and into the asset class that is commonly referred to as “alternatives,” which includes PE, VC, Hedge funds, private placements, and hard assets (which are things like gold, land, comic books, and much else). Like all Financial Poise webinars, each episode in the series is designed to be viewed independently of the other episodes: think sitcom rather than soap opera.

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EPISODES IN THIS SERIES

EPISODE #1 Are you an Accredited Investor, and if you are, so what? 5/7/15

EPISODE #2 What is the JOBS Act and Why Should You Care? 6/4/15

EPISODE #3 What is Equity Crowdfunding and Should it Matter to You? 7/9/15

EPISODE #4 Angel Groups vs. 506(b) Platforms 8/6/15

EPISODE #5 The Nuts & Bolts of Investing in a VC Fund 9/10/15

EPISODE #6 The Nuts & Bolts of Investing in Pre-IPO Shares 10/8/15

EPISODE #7 The Nuts & Bolts of Investing in a PE Fund 10/29/15

EPISODE #8 The Nuts & Bolts of Hedge Fund 11/12/15

EPISODE #9 Basic Investment Principles- from Asset Allocation to Z Scores 12/3/15


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(Dates below are premier dates; all webinars also on demand)

WHY ALTERNATIVES?

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o Finding satisfactory returns in a return-starved world

o Preserving the purchasing power of wealth

in the face of inflationo Better diversification


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WHO IS AN “ACCREDITED INVESTOR”?

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• There are several types of “accredited investors,” including:o A natural person with net worth (alone or with a

spouse) in excess of $1 milliono One’s primary residence is not counted as an asset, and

any mortgage is not counted as a liability, unless the mortgage is underwater

o A natural person with income exceeding $200,000 (or joint income with a spouse exceeding $300,000) in the 2 most recent years, and reasonable expectation of similar income in the current year

IF you meet either standard then YOU are an accredited investor.


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REVIEW: WHO IS AN ACCREDITED INVESTOR UNDER THE INCOME TEST?

By Yourself

•An annual income in excess of $200,000 in each of the two most recent years; and•A reasonable expectation of the same level of income in the current year

With Your Spouse

•An annual income in excess of $300,000 in each of the two most recent years; and•A reasonable expectation of the same level of income in the current year

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HOW DO YOU SUBSTANTIATE AI STATUS?

Rule 506(b) offerings: “check the box.” Rule 506(c) offerings:

By providing financial information directly to the issuer, such as tax returns, Forms W-2 and 1099 and recent pay stubs OR

By providing financial information to an intermediary, such as a broker-dealer, attorney, accountant or a third-party service provider, who can then verify income to the issuer

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HOW DO ACCREDITED INVESTORS PRESENTLY ACCESS ALTERNATIVE

INVESTMENTS? By having a pre-existing, substantive relationship

directly with the issuer More often, by having a pre-existing, substantive

relationship with an intermediary, such as a private platform, broker-dealer or investment advisor

In the secondary markets, for resales of private investments

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OFFERING PROCESS Offers and sales of securities must either be

registered with the SEC and offered publicly or exempt from registration and offered privately

In most cases, in order to participate in an exempt offering you must be an accredited investor

Historically, most exempt (aka: “private”) offerings issuers were prohibited from engaging in general solicitation or advertising

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WHAT IS THE JOBS ACT AND WHY SHOULD I CARE

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CAPITAL RAISEDRegistered Offerings v. Exempt Offerings

2010 2011$0

$200

$400

$600

$800

$1,000

$1,200

$1,070 $984 $902 $863

Registered Offerings 506

(In

billi

ons)

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THE JOBS ACT The JOBS Act directed the SEC to eliminate the

prohibition on general solicitation and advertising in certain private offerings in which only accredited investors may participate

All kinds of issuers, including companies, private equity funds, venture capital funds, and hedge funds may now use general solicitation and advertising

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HOW MAY ACCREDITED INVESTORS ACCESS ALTERNATIVE INVESTMENTS UNDER THE JOBS ACT

In many of the same ways as they have been doing, plus: In response to direct advertisements and

solicitations Through Reg D “equity offering” and other

investment platforms AIs, like many others, will also be free to invest via

Title III “crowdfunding portals”

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NAVIGATING INVESTMENT OPPORTUNITIES AVAILABLE TO ACCREDITED INVESTORS

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Traditional Investments

Bonds

Stocks

Public RealEstate

Hedge funds

Hard Assets Private Real Estate

Private Equity

Opportunities for Accredited Investors


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THINGS TO CONSIDER BEFORE JUMPING IN

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• How to structure your investment: individually, through a trust or other entity? o Each option will have to meet the “accredited

investor” definition• Tax consequences: understand how your choice of

investment vehicle will affect your tax liability, and also the tax risks related to the private investment itself

• Liability: are you investing as an equity holder, or as a lender? o What are your rights and obligations if the

investment fails?


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LOOKING AT SPECIFIC INVESTMENT OPPORTUNITIES

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o Fit in Overall Portfolioo Specific Investment Meritso Legal Issueso Tax Issueso IRA Opportunity


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LOOKING AT SPECIFIC INVESTMENT OPPORTUNITES (cont.)

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o Assumptions in Financial Projectionso Investment Processo Investment Teamo Illiquidity Premium Considerations


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MORE ABOUT THE FACULTY

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CHRIS CAHILL

Mr. Cahill is counsel with Lowis & Gellen LLP, in Chicago, Illinois. He guides secured lenders, creditors, debtors, creditors’ committees, potential purchasers and others through bankruptcy cases, out-of-court workouts, assignments for the benefit of creditors, and receiverships. Mr. Cahill has substantial mega-case experience at national law firms representing very large debtors, and has counseled and litigated on behalf of manufacturers and secured lenders in large and middle-market cases.

Mr. Cahill also publishes frequently and speaks regularly on commercial insolvency issues. He is an executive editor of Commercial Bankruptcy Litigation, 2d Edition (Jonathan P. Friedland, Elizabeth Vandesteeg & Christopher M. Cahill eds., 2015) and is the host of Accredited Investor Markets Radio, a weekly broadcast for investors, on accreditedinvestormarkets.com.


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http://www.accreditedinvestormarkets.com/aimkts-radio/


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SARA HANKS

Sara Hanks, co-founder and CEO of CrowdCheck, is an attorney with over 30 years of experience in the corporate and securities field. Her most recent position was General Counsel of the bipartisan Congressional Oversight Panel, the overseer of the Troubled Asset Relief Program (TARP), which was chaired by now-Senator Elizabeth Warren. Sara brings a wealth of legal expertise in securities and start-ups to the emerging marketplace for crowdfunding and other online offerings. Her new company, CrowdCheck, helps entrepreneurs through the disclosure and due diligence process, giving online investors the information they need to make an informed investment decision and avoid fraud.

At the TARP oversight panel, Sara spent 18 months on Capitol Hill investigating the implementation and consequences of the TARP in depth. She examined the government’s intervention in the automotive companies, the execution of the banking “stress tests,” the rescue of AIG, and the international aspects of the financial crisis.

Sara has worked with the London law firm Norton Rose, as well as the D.C. office of Rogers & Wells. She later joined the Division of Corporation Finance of the Securities and Exchange Commission and as Chief of the Office of International Corporate Finance led the team drafting the regulations that put into place a new generation of rules governing the capital-raising process and the way in which non-U.S. companies accessed the U.S. capital markets.

In 1990, Sara rejoined Rogers and Wells, which later became part of Clifford Chance, and in 2002, was elected to the first of three terms on the firm’s Partnership Council. During two of those terms, she served on the firm’s Audit Committee. While at Clifford Chance, she advised on capital markets transactions and corporate matters for companies in Asia, Africa, Europe and Latin America.

Sara received her law degree from Oxford University and is a member of the New York and DC bars and a Solicitor of the Supreme Court of England and Wales. When not working on corporate and securities matters, Sara is an aunt, Army wife, skier, cyclist, gardener and animal lover.


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DAVID M. [email protected]

Dave Freedman has worked as a journalist since 1978, primarily in the fields of law, business, and personal finance. He has served on the editorial staffs of consumer, business, professional, and trade periodicals. As a freelance journalist since 1999, he has authored feature articles for dozens of national and local magazines, newsletters, newspapers, and online media. Since 2005 Dave has served on the editorial staff of The Value Examiner (NACVA), focusing on business valuation and forensic accounting. He is a frequent contributor to Accredited Investor Markets (www.AIMkts.com). Dave is a coauthor of Equity Crowdfunding for Investors: A Guide to Risks, Returns, Regulations, Funding Portals, Due Diligence, and Deal Terms, to be published June 15, 2015, by John Wiley & Sons. For details, see www.ec4i.com.


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mailto:[email protected]

http://www.aimkts.com/

http://www.ec4i.com/


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HEATHER SCHWARZ-LOPESHeather Schwarz-Lopes is an expert in building successful businesses and a financial banking veteran. She is currently the

CSO and co-founder of EarlyShares.com. Conceived out of her frustration with the lack of resources afforded to small business owners, EarlyShares.com is dedicated to bridging the funding gap for small business entrepreneurs through the application of Crowdfunding. Early in its beginning, the organization came to the attention of the Start Up America Partnership, which made EarlyShares.com the featured company on their website on April 5, 2012, the same day President Obama signed the JOBS Act into law. Mrs. Schwarz-Lopesʼ enviable successes in the development of small businesses has prepared her to found a company that will assure the stringent vetting of small business applicants as well as solid investor protections.

As Sr. Vice President, Private Banker at Wells Fargo, Heather collaborated with a six-member Wealth Management team to offer world-class financial services to both corporate and high-net-worth individuals. She was responsible for communicating with corporate clients and high-net-worth individuals through the wealth management process to perform data gathering, needs assessment, goal development, and strategy implementation. Monitoring portfolio risk and performance, as well as adjusting strategies when necessary to achieve client goals and objectives was part of Heatherʼs responsibility. Additionally, she tracked leads and client relationship tasks using CRM software, compiling portfolio analytics for client presentations and delivering seminar-training sessions.

In 2004, through a network of established professional relationships with previous clients and associates, Mrs. Schwarz-Lopes started a financial services company: Beyond Leading Corp. The company provided commercial and residential mortgage solutions, yacht financing and comprehensive financial planning services. She managed a team of seventeen people, mainly composed of underwriters, loan officers, loan originators, and administration staffs with substantial hands-on experience building direct relationships with banks and other financial institutions. Heather has been an active participant in the Crowdfunding Industry as a co- founder of EarlyShares.com. She is a member of the Young Entrepreneurs Council and CIFRA.


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To be published in June 2015.More information at http://www.ec4i.com

(Image reproduced with permission of John Wiley & Sons)

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http://www.ec4i.com/

The JOBS Act & the accredited investor: What every accredited investor should

know before investing in alternative assets

©2015


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About Financial Poise™

DailyDAC, LLC, d/b/a Financial Poise™ provides continuing education to business owners and executives, investors, and their respective trusted advisors. Its

websites, webinars, and books provide Plain English, sometimes entertaining, explanations about legal, financial, and other subjects of interest to these

audiences.

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The ChamberWise™ Education Consortium is a resource for Chambers of Commerce to provide its members with valuable member benefits by offering relevant business education webinars; and generate revenue for the Chamber as well.

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Visit www.chamberwise.org


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IMPORTANT NOTE:THE MATERIAL IN THIS PRESENTATION IS FOR

GENERAL EDUCATIONAL PURPOSES ONLY. IT SHOULD NOT BE CONSIDERED LEGAL,

INVESTMENT, FINANCIAL, OR ANY OTHER TYPE OF ADVICE ON WHICH YOU SHOULD RELY.

YOU SHOULD CONSULT WITH AN APPROPRIATE PROFESSIONAL ADVISOR TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.


©2015

What is the JOBS Act and Why Should You Care?

Education

Transcript of What is the JOBS Act and Why Should You Care?