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Start Up, Intellectual Property, and Securities Lawyers

Raising Capital / Securities Compliance

Expertise in Compliance with Securities Laws When Raising Capital


California strictly regulates fundraising for your company or startup, whether through equity or debt, in order to protect investors. Codified as Corporations Code Section 25401, this state la provision mirrors Rule 10b-5, the federal anti-fraud provision. Section 25401 reads:


“It is unlawful for any person, in connection with the offer, sale, or purchase of a security, directly or indirectly, to do any of the following:

(a) Employ a devise, scheme, or artifice to defraud.

(b) Make an untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading.

(c) Engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.” 


The language here is similar to that of general fraud provision under Civil Code §3294, which imposes liability to a defendant engaging in “intentional misrepresentation, deceit, or concealment of a material fact,” except Section 25401 does not require that the investor prove that he or she actually relied upon specific statements; it merely concerns the veracity of statements made in communication with respect to a securities transaction. Under clause (b), investors bringing action against a company must only prove either that the company made a misstatement of material facts or that it omitted from its communication material facts.


This presents a difficult challenge for companies that want to raise money and or communicate the successes of their products to the outside world. Some of what they disclose may be facts, and some may merely reflect the management’s opinions. Sometimes, the distinction between the two is clear. Other times, the line separating facts and opinions can be blurry. An experienced securities attorney is essential for any company or individual considering a securities transaction. We work closely with our domestic and non-US clients to interpret, implement and assure compliance with a range of securities law compliance matters, including:


  • Developing and negotiating founder stock agreements/plans
  • Advise and development of multiple classes of equity, including preferred shares
  • Investor qualification planning
  • Compliance with Reg D, and other exemptions to SEC registration 
  • Preparation and negotiation of private placement memorandum (PPMs)
  • Drafting and negotiating term sheets and other final investment documents
  • Preparation and review of Securities Exchange Act reports
  • Disclosure matters, including compliance with Regulation FD and Regulation G
  • Compliance with the Foreign Corrupt Practices Act
  • Preparation and review of proxy statements, advice on shareholder proposals and assistance with conduct of shareholder meetings
  • Compliance with insider trading rules, Section 16 reporting and liability matters and implementation of issuer repurchase and Rule 10b5-1 issuer and individual trading programs
  • Corporate governance, including board independence and committee matters, fiduciary duties, takeover defenses, dealing with activist shareholders, proxy access and director and officer liability issues
  • Executive and key employee compensation, including creation of and advice with respect to equity-based compensation plans and executive employment and severance agreements.


Our approach to compliance includes advice and counsel provided before litigation arises to reduce the risk of litigation. We draw on the experience of our securities litigation and regulatory enforcement attorneys to counsel clients on making and accepting securities investments. We also advise and litigate when necessary on Director & Officer and other issues, including claims of fraud, failure to disclose, material omissions, etc. 


Contact us today to schedule a free consultation!  

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