Investment Attorney Basics
Generally speaking, when making an investment you should have an investment attorney on your side. And there should be an understanding of that investment. It’s that the bigger your investment, the more of an investment you’re going to have to make in good counsel.
The reason why I say that is I’ve seen deals as small as five thousand dollars. They required very little legal work. Still, you would need to draw up some documents. You must protect and securitize your investment in an adequate way even at that low level. Then I’ve seen deals as high as 500 million dollars. Here, you securitize the borrower’s ability to repay the investment. So that’s in the context of financing deals.
In investing in security, you definitely need counsel on your side. This is especially the case if it’s a private placement deal. Consider a typical private placement deal for security. You’re an accredited investor when you fill out and review the proper documents. Those documents have a lot of consequences and covenants. You need to make sure you understand them and you need to negotiate them to the best of your ability. So, having experienced counsel on your side will save you a lot of heartache down the road. At the very least, you’ll go into the investment with your eyes wide open. You have the understanding of what could happen, good or bad. So, get yourself good counsel that knows what they’re doing in that regard.
Investment Attorney Helps with the SEC
Choosing appropriate counsel makes a difference when you’re dealing with the SEC. In an initial offering, a private placement is different from it done over the counter. Those are also different from having it done in pink sheets, otherwise called a public filing. Having the proper documents drawn up, having the appropriate schedules filed is critical. It makes the difference between whether you’re liable for something. There are also criminal considerations that you have to think about as well. So, it’s risky anytime you’re offering investment. This is whether it’s in a private context or in a public context.
Beware of Pitfalls
You should also be aware of all the pitfalls there. To face them you need good counsel. One that can navigate you through the myriad of federal and state regulations. I find myself giving some similar negative advice to different clients. They have to do with the registration of securities. For example, do I need to register if I’m offering a private placement or am I exempt? If I am offering a publicly-traded filing, is it over the counter and how would I deal with that registration? There’s the required underwriting process and the required financing process to consider. There are types of documents and expectations to consider. The client must think of these things when coming up with a legal budget and a strategy.
These are the general areas that we’ve received concerns and questions about. We’ve had to address them quite often. And we’ve been able to do that well. It’s in a way where the client feels comfortable about the impediments and risks that they may face. This is all leading to actually consummating the deal.