Private Equity Divestiture;

The PE industry internationally is active with their divestiture strategies based around mostly market conditions which are viewed as robust. Divestitures were slightly off in 2018 but opportunities will remain active but for buyers being able to buy well maybe challenging. PE’s are looking to move quickly once the divestiture decision is made and achieve their value expectation.

The market for selling is active but not without competitive challenges for the sellers. Buyers should not be afraid to negotiate and wait if necessary.

An interesting Stat is the IPO process is being considered as an exit option for the seller and consideration from 2% in 2017 to 16% in 2018 and looking forward firms in are at 27% for exits over the next 18 to 24 months according to EY. I happen to agree that smaller public transactions will be on the rise based on PE and Non-PE sellers and this creates capital access opportunities.

PE’s are looking to maximize value as any good seller should and buyers should be looking to buy well.

Baby Boomers in Transition

Investment, business, and management opportunities are abundant. However, great deals are scarce and much harder to find if one doesn’t know where to look. One always hears about disruptive technologies like Amazon, Google, Facebook, and other “unicorns.” Yet the largest transfer of wealth in history is now underway, and it is in the form of established operating businesses owned by Baby Boomers.

When analyzing the issues, they must face during this transition, it is important to understand and appreciate the impact on the US economy as Baby Boomers retire. There is currently an opportunity in the business transition segment of the financial services industry to generate unprecedented wealth and income as a fully-integrated company providing a level of end-to-end solutions for the Baby Boomer generation. This opportunity is due to a multi trillion-dollar transfer of wealth within the United States as Baby Boomers ‘cash out’ by selling their businesses and retire. The baby boomer generation currently owns a disproportionate number of private businesses that are either in transition or divestiture, or soon will be. Many of these businesses are low-tech mainstream businesses.

New Tools Exist to Fund Business Development:

The first classic obstacle any prospective business faces is raising sufficient capital to fund its startup and early-stage operations. Sure, some well-connected entrepreneurs have access to capital, but many viable business plans will die on the vine every year because the principals cannot overcome the inertia of skepticism:

 “How much of your own money are you risking?”

  “Your cash flow is negative. Come back when you are profitable.”

 “How can I believe this will really work? You’ve never done this before.”

“This idea may have potential, but it’s not big enough to interest my group.”

“We might be able to help, but we will require 75% ownership and operational control.”

Does this sound familiar?

What has been needed is a practical mechanism to allow small and medium-sized enterprises (SMEs) to bypass the traditional capital marketplace and allow them to raise capital directly from the millions of well-to-do individuals throughout the USA who have the knowledge and the willingness to invest in entrepreneurial ventures. Such general solicitations had been strictly prohibited by the Securities and Exchange Commission (SEC) since the passage of the Securities Act of 1933, and with good reason; without safeguards, naïve investors had often been lured into making risky investments, either because they were defrauded by unscrupulous practitioners, or because they did not have sufficient knowledge of investment practices or information at their disposal to make an informed decision regarding the potential risk and reward.

Passage of the JOBS Act by Congress and the subsequent adoption of amendments to SEC Rule 506 of Regulation D have modernized the regulatory environment by eliminating the prohibition on general solicitation so long as certain conditions are strictly met. Under the new Rule 506(c) of regulation D, securities may be offered to the public through general solicitation provided that:

  • All purchasers are ‘accredited investors’;

  • Reasonable steps are taken to verify that each purchaser is an ‘accredited investor’; and,

  • All other provisions of Regulation D (and all other applicable law) are fully satisfied.

An accredited investor is defined as a person having income of at least $200,000 per year (or $300,000 including spouse) for two successive years with the expectation of the same for the current year, or a person (with or without a spouse) having a net worth in excess of $1,000,000, excluding the value of that person’s primary residence.

The key to making the new Regulation-D §506(c) process practical and viable for SMEs is, of course, the ability to cast a wide net through various means to identify and attract potential investors. Years ago, the only means of general solicitation would have been direct mail or possibly radio or TV, all of which were (and are) expensive. But with the proliferation of modern Internet access and social media, it is possible for almost any SME or individual entrepreneur to reach thousands (if not millions) of potential investors.

Now that the regulatory mechanism is in place and the means of general solicitation exist, how should the entrepreneur or SME proceed? That is where the expertise of Create Acquire Exit, LP (CAE) comes into play. CAE has the expertise to navigate the Regulation-D §506(c) process in order to maximize the prospects for a successful campaign and to assure strict compliance with all of the SEC’s arcane rules and regulations.

Specifically, CAE provides consulting services and market access for qualified businesses needing to raise capital for such purposes as growth and recapitalization, merger and acquisition, or for ‘going public’. CAE functions as a marketing and support organization providing expertise, guidance and a suite of support services to its clients. CAE is not a licensed broker or broker-dealer, and does not accept success fees.

There are two approaches by which CAE may participate in transactions:

Sponsored Transactions. CAE participates in Sponsored Transactions as principals directly involved at the management level. Each transaction is a self-issue under current regulations and will be marketed as a Direct Public Offering (DPO) or Direct Funding Offering (DFO) to accredited investors and institutions only; or,

Client-Centric Transactions. CAE provides the necessary support and strategy guidance for a client to undertake a self-issue of their securities under current regulations. These self-issued securities will be marketed as a Direct Public Offering (DPO) or Direct Funding Offering (DFO) to accredited investors and institutions only.

CAE believes that the new Regulation-D §506(c) rules marks the advent of a new era of growth and opportunity by opening up a heretofore underutilized and largely unavailable source of capital for SMEs and entrepreneurs. But to take advantage of this resource will require knowledge and expertise; the new rules are strict and the consequences for missteps, even if inadvertent, could be devastating to a business project. CAE’s purpose is to function as a trusted, independent advisor, agent, partner, or principal; CAE is oriented toward long-term relationships with successful clients.


CAE is a Delaware Limited Partnership with partners in Maine, Florida, New Jersey, Maryland, Virginia North Carolina and Illinois operating as a Private Investment Company, Merchant Banking Firm and Transition Specialist offering investment strategies, operational experience, and securities knowledge working in concert to accomplish both wealth preservation and growth.

How to Succeed in Selling Your Business

(As seen in 2,400 publications)

As a larger proportion of the American population reaches retirement age, the issues of wealth transfer and asset management become even more prominent. “The largest transfer of wealth in history is now underway, and it is in the form of established operating businesses owned by Baby Boomers,” according to a white paper by C2C Business Strategies, LLC, a business management and consulting organization specializing in business transitions.

Baby boomers and their transition advisors will face several challenges over the next several decades. Some tips to make the most of the transition include: - Prep work: Many baby boomer business owners have given little or no thought to the transition process, and they may find themselves unable to sell the business when they want to. Most financial consultants recommend a lead time of three to five years to prepare a business.

Meanwhile, as more baby boomers seek retirement, the surplus of businesses available for sale may reduce business values.- True value: Survey findings of business owners suggest that many overestimate the value of a business because they are basing estimates on projections or future orders rather than the current cash the business is generating.- Good advice: Baby boomers looking to sell their business can benefit from a skilled transition advisor to guide and direct the process. Advisors can help business owners decide on a realistic price and determine a sale structure that works for both buyers and sellers. As in the case of a real estate agent negotiating a home sale, a business advisor will find the right buyer for a business and will work with the buyer and seller until the transaction is complete.

Tips for business owners to help ensure a smooth sale include: - Good housekeeping: Make sure all financial information is current and in order. Time is essential once a business-sale transaction is underway, so don’t slow down the process by scrambling for information. - Flexible financing: Data show that sellers who accept financing terms receive, on average, 86 percent of their asking price, compared with 70 percent for those who will only accept cash. An advisor can help sellers evaluate financing terms to maximize sale prices.  

For more information about transitioning out of a business, visit

Why Small and unprepared private companies go public!

Why Small and unprepared private companies go public! This is simple they are sold a bill of goods that it will be easy to raise money and they will create liquidity for the principals. There are three programs first the promise of Equity Lines of Credit in the form of PIPE’s (Private Investment in Public Equities) or Convertible Debt that can be converted into free trading shares or forward split of shares, all of these programs result in large blocks of stock flooding into the market tied to a promotion to maximize cash for the participants.

In almost all cases there are Promoters, Key Insiders and Consultants make money. The current shareholders and new ones to be attracted thru the promotion get screwed, not all however will lose out because in any good Ponzi scheme you have to have some winners (early buyers and sellers) to get the scheme going “the momentum curve” but when the promotion stops the last ones in will be the losers every time.

One must point out as well that investors who are willing to act on tips and promotional alerts are not as much victims as they are enablers of the process. In this day and age anyone with an internet connection can research transactions with a couple of stokes on the keyboard and disprove the claims.

One must wonder why these issues do not seem to draw more attention from the regulators. Every element in which these shames are perpetrated the process is either regulated by the Securities and Exchange Commission (SEC) the Issuers and FINRA the self-regulatory agency for Broker Dealers who effect the share transfer. It seems to me that regulators are ineffective in policing this type of transaction and stymy those options such as the JOB’s Act that could benefit the SME business market.

The Red Flags to look for;

1.       Large authorized number of shares

a.       There is not a legitimate reason to have hundreds of millions of shares. In most cases this is a telegraph of what is to come which is massive dilution and stock manipulation.

2.       Sharp increase in shares issued and outstanding

3.       Lack of reporting data (compliant public filings)

a.       Not a trustworthy transaction.

4.       Preferred shares convertible to large number of common for insiders

a.       In many cases this preferred position is to protect insiders from dilution and maintain their equity while other shareholders are diluted.

5.       Financial commitments based on equity lines and or convertible debt

a.       Any financing that is based on a discount to share price with compensating balance covenants are extremely toxic to everyone but the lender.

6.       Investor Relations Campaigning

a.       The hyping of the company in the open market with little or no validation!

7.       Increased number of press releases

a.       Increasing press releases with little or no substance validated the potential of an IR campaign.

8.       Recent volume spike or spikes

a.       For no apparent reason other than an IR campaign is underway.

9.       Management turnover

10.   Mounting Financial Losses

a.       Companies that have never made money will most likely not do so without a significant change in its operation objective.

11.   Decreasing or no Shareholder Equity

12.   Decreasing or no Gross Revenue

13.   Unresolved Litigation

It is my opinion that some of these deals (reverse acquisition) could have worked if they had been approached with a proper plan. The first step in any transaction such as this is the assessment of the company viability as a publicly traded company moving on to preparation and being sure that you fully understand the process not just what you are being told “trust but verify”. It is very unlikely that companies pursuing this type of deal will be able to raise capital other than on a very toxic basis. The only way to raise a sustainable amount of capital is thru a registration which requires a real business fundamentals and business plan. There are no guarantees that even with a registration they will be successful.

Further it is my opinion that a qualified smaller company can employ a public offering to achieve their corporate goals. A company with an established business with growth opportunities based on business and financial fundamentals can control the cost of going public as well as the maintenance and ongoing compliance. The primary reason for going public is the access of fresh capital, create liquidity for current stakeholders! The fresh capital must be adequate to achieve business goals that can provide an increased Return-On-Investment (ROI) for the insiders as well as the new stakeholder’s this includes the added cost of being public and the dilution that insiders will face.

I have been writing about the future of SME size transaction and the future public markets.


Self-Underwriting (SU’s) Initial Public Offerings

It was thought that Self-Underwriting (SU) would become the wave of the future back in the 1990’s in in fact SU’s peaked in 1999 and has become an obscure and unlikely process today.

Back in 2005 a detailed paper was written with a comparison of alternatives for going public from reverse takeovers, self-underwriting IPOs and traditional IPOs. The scope of the document was as follows;

“We examine the characteristics of firms using reverse takeovers and self-underwritten IPOs as an alternative to the traditional underwritten IPO. We find that at the time they go public, firms that use alternative mechanisms tend to be less profitable than contemporaneously issued IPO firms of comparable size in the same 3 digit SIC code, but they do not exhibit significantly higher distress. However, by two years post going public, they have significantly increased debt and experience declines in profitability and balance sheet liquidity. Furthermore, we find that RT and SU firms are characterized by lower levels of trading liquidity and significantly higher volatility, as measured by the standard deviation of returns. While the combined sample of RT and SU firms have comparable institutional ownership post going public to their control IPO firms, RT firms are characterized by significant lower institutional ownership than their matches, and while IPO firms experience significant increases in institutional support, those using RTs and SUs experience declines. We also find evidence that firms utilizing alternative going public mechanisms outperform their matched traditional IPO counterparts in the short term, and exhibit comparable performance in the three years following going public as indicated by equal weighted buy and hold returns.”

There was, a number of points in the report that the perception of an SU would have had a weaker due diligence regiment and lack of solid backup data/documentation. This may have been somewhat true back in the 1990’s but less so today and history has shown that even the strongest of Investment Bankers make many of the same mistakes and a good recent example is Facebook you would have thought they had learned from the Dot Com era.

A further weakness of a SU was thought that a SU would be unable to attracted institutional investors without a creditable underwriter. In today’s market I would think that retail investors would be attracted to well prepared and documented SU’s today and as more data is collected some institutions will follow or at least track transactions as they grow and thus become more appetizing for the institutions.

My assumption to why SU’s lost their luster was that money was readily available using other means that where less costly and intrusive to the issuer. What the reasons are is open to interpretation and opinion.

The issue today is with the aid of technology and the lack of access to capital will SU’s have a chance of a solid comeback for specific classification of companies. I clearly believe that SU’s or a better term Direct Public Offerings are already on the way back for certain business classes.

Can't Find the Bridge to Capital

The economy has been improving ,regulations have been improved upon to access markets by small businesses to raise capital. The bridge between capital and opportunity has still not been build. The two sides are divided by obstacles that have not yet been bridged for general use. The issue is not the lack of capital but rather access and allocation.

Let’s review the two sides to a financial transaction;

Capital (Investors) whether individuals or institution everyone is looking for a good deal institution have a leg up because they have the resources to vet a transaction. Institutions are interested in larger transactions that fit their criteria. The individual in many cases do not have the recourses to vet the transaction leaving them at risk. The individuals need access to qualified transactions that are vetted, yet in many cases the needed resources are not available.

Opportunity (Investment) many opportunities are not truly prepared to raise capital nor do they have a bridge to the investors who may have the greatest interest in the opportunity.

Raising capital is a dysfunctional process for most and the needed infrastructure is wholly inadequate. We still suffer from it is not what you know it is who you know and if you do not have the know you are virtually an orphan.

With the internet and the hoard of would be funding platforms available to day it is questionable to how many of them can actually help with the placement of an investment opportunity.

Small Business Financing!

The early stage and small business land scape is dynamic and troublesome for almost any involved. In 2013, there were 860,000 new businesses and 788,000 closures. Big banks only approved around 24.1% of small business loans. Smaller banks have a much higher approval rate of around 48.9%. Alternative Lenders approved 58.2% of loan requests. (Source: Biz2Credit 2017)

The average SBA 7(a) loan is $371,628. The maximum loan amount is $5 million. There is no minimum. (Source: (SBA)

A great many small business cannot qualify for bank financing and their principles are not strong enough to guarantee the funding. 75% of small businesses used their own personal finances as primary startup funding. Other funding options were banks at 16% and family/friends at 6%.



More and more individuals are asking about setting up funds as small as $250,000 and up to $50,000,000. Starting a small fund can be accomplished with some effort and having an affinity group willing to participate. To establish a larger fund is a significant challenge and outside investors will require an experienced manager with a successful track record. Most with the needed track records and experience are already managing one or more funds.

Smaller funds can be operated and gain valuable experience deploying their capital in businesses in which their management has experience. It is like a new born crawling before you walk and walking before you run gaining knowledge and experience as you go.

Being the owner and manager of your own fund carries a level of prestige in your local business community and will facilitate and attract more opportunities.

There are many different fund types, but the major categories are;

Venture Capital

Real Estate

Growth Capital

Mezzanine Financing

Leveraged Buyouts (LBO)

Special Situations aka Distressed or Turnaround

Fund of Funds


Starting and building your own fund can be rewarding and put you on a career path with unlimited potential. Organizing a fund can be daunting and expensive but it does not have to be.

How many startups fail

Nіnе оut оf tеn ѕtаrtuрѕ wіll fаіl. Thіѕ іѕ a hard аnd blеаk truth, but оnе thаt уоu’d dо well tо mеdіtаtе оn. Entrерrеnеurѕ mау еvеn wаnt tо wrіtе thеіr fаіlurе роѕt-mоrtеm bеfоrе thеу lаunсh thеіr buѕіnеѕѕ.

Whу? Bесаuѕе vеrу орtіmіѕtіс еntrерrеnеur nееdѕ a dоѕе оf rеаlіtу nоw аnd thеn. Cоld ѕtаtіѕtісѕ like thеѕе аrе nоt іntеndеd tо dіѕсоurаgе еntrерrеnеurѕ, but tо еnсоurаgе thеm tо wоrk ѕmаrtеr аnd harder.

Whаt are the сhаrасtеrіѕtісѕ оf ѕtаrtuрѕ thаt ѕuссееd?

Thеrе аrе рlеntу оf сhаrасtеrіѕtісѕ оf ѕuссеѕѕful ѕtаrtuрѕ. Mу gоаl іѕn’t tо lіѕt thеm аll fоr уоu, but rаthеr tо роіnt оut ѕоmе оf thе mоѕt ѕіgnіfісаnt саuѕеѕ оf ѕuссеѕѕ.

1. Thе рrоduсt іѕ perfect fоr thе mаrkеt.

Thеу mаkе рrоduсtѕ nо оnе wаntѕ. A саrеful ѕurvеу оf fаіlеd ѕtаrtuрѕ dеtеrmіnеd thаt 42% оf thеm іdеntіfіеd thе lасk оf a mаrkеt need fоr their рrоduсt аѕ thе ѕіnglе bіggеѕt rеаѕоn fоr thеіr fаіlurе. If уоu’rе gоіng tо ѕреnd уоur tіmе mаkіng a рrоduсt, thеn ѕреnd уоur tіmе mаkіng ѕurе іt’ѕ thе rіght рrоduсt fоr thе rіght mаrkеt.

2. Thе еntrерrеnеur does nоt іgnоrе anything.

A gооd рrоduсt іdеа аnd a ѕtrоng tесhnісаl tеаm аrе nоt a guаrаntее оf a ѕuѕtаіnаblе buѕіnеѕѕ. Onе ѕhоuld nоt іgnоrе thе buѕіnеѕѕ рrосеѕѕ аnd іѕѕuеѕ оf a соmраnу bесаuѕе іt іѕ nоt thеіr jоb. It саn еvеntuаllу dерrіvе thеm оf аnу futurе іn thаt соmраnу.

Thеу hаd a grеаt рrоduсt. They hаd a ѕtrоng tеаm. Whаt dіd thеу lасk?

Thеу оvеrlооkеd thе mоѕt іmроrtаnt аѕресtѕ оf buѕіnеѕѕ рrосеѕѕ аnd the “bоrіng ѕtuff.” Thе CEO thіnkѕ, “It’ѕ my jоb tо lеаd.” Thе CMO thіnkѕ, “It’ѕ mу jоb to mаrkеt.” Thе lеаd dеvеlореr thіnkѕ, “It’ѕ my jоb tо соdе.” But a ѕtаrtuр саn’t ѕеgmеnt іtѕ rеѕроnѕіbіlіtіеѕ lіkе thаt. Thіngѕ аrе fаr mоrе оrgаnіс іn a ѕtаrtuр, mеаnіng thаt rоlеѕ аnd rеѕроnѕіbіlіtіеѕ wіll оvеrlар. Smаll thіngѕ саn turn іntо lаrgе things. Sоmе оf thе mоѕt іmроrtаnt соmроnеntѕ оf a ѕtаrtuр аrе thоѕе annoying issues оf buѕіnеѕѕ рrосеѕѕ, buѕіnеѕѕ mоdеl, аnd ѕсаlаbіlіtу. 

Suссеѕѕful еntrерrеnеurѕ undеrѕtаnd thаt thеу muѕt wоrk оn thеіr buѕіnеѕѕ, nоt іn thеіr buѕіnеѕѕ. Gеttіng саught uр in thе mіnutіае of рrеѕеntаtіоnѕ, рhоnе саllѕ, mееtіngѕ, аnd еmаіlѕ саn dіѕtrасt thе еntrерrеnеur frоm thе hеаrt оf the buѕіnеѕѕ.

3. The company grows fast.

Whо ѕауѕ thаt fаѕt grоwth іѕ unѕuѕtаіnаblе? And whо even саrеѕ?

Grоwth — fаѕt grоwth — іѕ whаt еntrерrеnеurѕ сrаvе, іnvеѕtоrѕ nееd, аnd markets wаnt. Rаріd grоwth іѕ thе ѕіgn оf a vеrу gооd іdеа іn a hоt mаrkеt.

Grоwth lеаdѕ tо mоrе grоwth, whісh lеаdѕ tо еvеn mоrе grоwth. A ѕtаrtuр ѕhоuld nоt bе ѕаtіѕfіеd wіth marginal ѕіnglе-dіgіt grоwth rаtеѕ аftеr mаnу mоnthѕ оf ореrаtіng. If thе grоwth dоеѕn’t hарреn аftеr a сеrtаіn аmоunt оf tіmе, thеn thе grоwth wіll nоt оссur. A соmраnу thаt іѕ nоt grоwіng іѕ ѕhrіnkіng.

Thе ѕесоnd mаjоr rеаѕоn whу ѕtаrtuрѕ fаіl іѕ thаt thеу “rаn оut оf саѕh.” Whу dіd thеу run оut оf саѕh? Bесаuѕе thеу dіdn’t grоw fаѕt еnоugh. If уоur ѕtаrtuр саn grоw fаѕt, уоu саn еffесtіvеlу bураѕѕ ѕоmе оf thе bіggеѕt ѕtаrtuр kіllеrѕ — lоѕіng tо thе соmреtіtіоn, lоѕіng сuѕtоmеrѕ, lоѕіng personnel, аnd lоѕіng раѕѕіоn. Rаріd grоwth еаrlу оn іѕ a ѕurе ѕіgn оf futurе ѕuссеѕѕ.

4. Thе tеаm knоwѕ hоw tо rесоvеr.

A tеаm оf реорlе bасkѕ every ѕtаrtuр. Thе mоrе vеrѕаtіlе thаt tеаm, thе bеttеr chance thеу hаvе оf ѕuссееdіng.

“Vеrѕаtіlіtу” іѕ оftеn vіеwеd іn a lіmіtеd ѕеnѕе, that оf роѕѕеѕѕіng more thаn оnе ѕkіll оr tаlеnt. Vеrѕаtіlіtу іn thе ѕtаrtuр еnvіrоnmеnt іnvоlvеѕ muсh mоrе thаn ѕоmеоnе’ѕ ѕkіllѕеt. It rеԛuіrеѕ mіndѕеt. Stаrtuр tеаmѕ muѕt роѕѕеѕѕ thе аbіlіtу tо сhаngе рrоduсtѕ, аdjuѕt tо dіffеrеnt соmреnѕаtіоn рlаnѕ, tаkе uр a nеw mаrkеtіng аррrоасh, ѕhіft іnduѕtrіеѕ, rеbrаnd thе buѕіnеѕѕ, оr еvеn tеаr down a buѕіnеѕѕ аnd ѕtаrt аll оvеr аgаіn.

It’ѕ аll аbоut rесоvеrіng frоm blows. Tеаmѕ thаt саn rесоvеr tоgеthеr, also роѕѕеѕѕ thе unіԛuе trаіt оf hаrmоnіоuѕlу wоrkіng tоgеthеr thrоugh tоugh tіmеѕ.

Stаrtuрѕ wіth со-fоundеrѕ hаvе a hіghеr ѕuссеѕѕ rаtе thаn соmраnіеѕ wіth a ѕіnglе fоundеr. Having a соfоundеr сrеаtеѕ a раrtnеrѕhір. Thеrе’ѕ muсh mоrе ассоuntаbіlіtу, whісh hеlрѕ уоu tо аvоіd ѕоmе оf thе ріtfаllѕ оf a ѕіnglе сhаrіѕmаtіс lеаdеr. Pluѕ, a со-fоundеr wіll hаvе ѕkіllѕ thаt уоu dоn’t hаvе.


If уоur ѕtаrtuр lаѕtѕ, уоu’rе luсkу. Yоu’vе bееn аblе tо dо ѕоmеthіng thаt 90% оf nеw buѕіnеѕѕеѕ hаvеn’t. Evеn thоugh thеrе’ѕ a lоt of luсk іnvоlvеd іn thе ѕuссеѕѕ ѕtоrіеѕ lіkе Gооglе аnd Fасеbооk, thеrе аrе mоrе humblе rеаѕоnѕ whу оthеr ѕtаrtuрѕ ѕuссееd. Thеу hаvе a рrоduсt that mееtѕ a nееd, thеу dоn’t іgnоrе аnуthіng, thеу grоw fаѕt, аnd thеу rесоvеr frоm thе hаrd-knосk ѕtаrtuр lіfе.

If уоu’vе gоt thеѕе fоur сhаrасtеrіѕtісѕ, thеn уоu’rе ѕеttіng уоurѕеlf uр fоr mаjоr ѕuссеѕѕ.

Non-Profit and Securities Laws

There is a common misconception that religious and other nonprofit organizations are exempt from compliance with the securities laws. They are not. Nonprofit organizations that engage in fundraising activities involving the offer and sale of securities must comply with the federal securities laws. They also must comply with the securities laws of each state in which such activities are conducted. This Article provides an overview of the federal and state securities laws that govern the sale of securities by nonprofit organizations, and describes the actions required to comply with those laws. The following addresses the impact of the Philanthropy Protection Act of 1995 and the National Securities Markets Improvement Act of 1996 on the regulation of securities activities of nonprofit organizations.

Nonprofit organizations engage in a wide variety of fundraising activities that involve the issuance of securities. Such organizations may issue notes, bonds, and other debt instruments to raise funds

for general operations or for the construction or purchase of churches, schools, hospitals, retirement homes, or other facilities. Many national religious denominations operate church extension funds that issue notes to denominational members to raise funds to make loans to new or financially troubled congregations. Nonprofit organizations administer pooled income funds and pooled charitable trust funds. A group of nonprofit organizations also may pool their funds for common investment in a manner consistent with their shared religious or social principles or objectives. Nonprofit organizations issue charitable gift annuities and accept charitable contributions in the form of charitable remainder trusts and charitable lead trusts. These activities require nonprofit organizations to comply with state and federal securities laws.

The SEC has taken the position through interpretive releases and no-action letters that each of these activities, at least in some circumstances, involves the issuance of securities under federal securities laws. In some circumstances, however, some of these activities (e.g., the acceptance of an unsolicited donation through an irrevocable charitable trust) may not involve the issuance of a “security.” A discussion of what constitutes a security is beyond the scope of this Article. Under section 2(1) of the Securities Act, a “security” is defined as: Any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. A similar definition is contained in section 3(10) of the Securities Exchange Act of 1935 and section 401(2)(e) of the 1956 Uniform Securities Act.