Issuers want to know: How do we get our offering to quickly pass compliance scrutiny

So you have your company set up, you have an idea, you have a product or service to offer and now you need to raise money to bring it all to life and get to market. To raise the needed funds, you have decided to offer equity or debt in your company.

The JOBS act has opened up the private securities market to many different types of investors based on the offering exemption an issuer is utilizing for their capital raise.

Putting the deal together means following rules set in place by the SEC for the offering and banking regulators for the escrow account.

The first rule to be aware of is the requirement of completing bad actor checks on all officers, directors, owners of 20% or more of the company, members and managers of a business according to the SEC rules. See https://www.sec.gov/info/smallbus/secg/bad-actor-small-entity-compliance-guide.htm

What does a compliance officer look for when approving your offering?

Did you list all the persons mentioned in your PPM or risk disclosure document that fit the description of an associated person in the offering onboarding system? If you did not, this will lead to delays in approval because only with a complete bad actor screening may an offering be approved.

Another requirement for offering approval and escrow account creation is accurate documentation.

It is important to keep in mind that a bank account is to be opened for escrow and as such banking information and documentation on the business will be required.

The documents for account creation required include:

  1. Formation documents- Articles of incorporation or Articles of organization.
  2. A signed operating agreement.
  3. If the company is organized as a trust, the trust agreement.
  4. If the signer for the escrow account will not be the person listed as authorized person in the articles of incorporation or articles of organization, then a corporate resolution will be needed to let the escrow agent know that the person listed will have signatory authority on the escrow account.

With all these requirements for information and documentation met, establishing your escrow account will be a smooth process.