Can I Be Creative In My Financing Approaches Without Committing a Securities Violation?

Q: We are in the midst of raising capital and was trying to “Think outside the box” and come up with innovative ideas.

We thought of our website. We decided to put our fundraising efforts on our website.  For instance:  “We are raising $1.5 Million – if you’re interested “click here.”

“Click here” leads you to a form that you fill out and we would then contact you.

3 months ago we hired a consultant. Well we ran past him our idea, and told us that it would violate Blue Sky Laws is that correct? I can’t find anything that supports his theory. We aren’t trading shares or securities nor our we attempting too. we are merely getting information. Is that a crime?

A:  (Jason)  Your consultant is correct.  Merely offering unregistered securities (which yours are, as you are a private company) to the general public is a violation.  You can not use your website to solicit investment.  If you do, it should be password protected and only accredited investors should be allowed access. 

A general “hey, we are raising money” tell us about yourself, is way too close to the line to be safe.  I would never mention anything about fundraising plans on a corporate website.

  • Wouldn’t it be legal to allow the user to attest that he is an accredited investor by checking a checkbox in the same way that visitors to “adult” sites can attest they’re 18 or over?

  • Jason

    I wouldn’t risk it. Even in this method, you are still out in public “offering” securities. The SEC takes a very strict interpretation, as well as state Blue Sky laws. This is a completely different standard than the adult sites and the ramifications are not good. Running afoul of securities laws can sink your venture day 1.

  • dan

    They should just ask for donations. Grin