socialmedian: Social Median Disregards 60 Years Of Securities Regulations With Sale Of Stock On Twitter

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Social Median Disregards 60 Years Of Securities Regulations With Sale Of Stock On Twitter

Source: TechCrunch

Aug 20, 2008

Summary

SocialMedian founder Jason Goldberg wrote a Twitter message moments ago letting people know that they are raising a new round of funding, up to $500k, and to contact him if you’re interested. Great way to get investors, right? Exactly not - the whole purpose of the Securities Act of 1933 is to prohibit public offerings like these unless accompanied by a registration statement and a valid prospectus approved by the Securities and Exchange Commission (the fun stuff is in Section 5). The Twitter also violates various state laws.

The good news - enforcement is unlikely, my lawyer tells me. But investors who find out down the road that they’ve lost money are in for a treat - they could almost certainly rely on the offering to get their money back via a rescission right. Of course, by the time they realize they want their money back there may not be any money left to get.

Most venture financings are excluded from Securities Act registration via a private offering exemption. But the key to these exemptions are that they aren’t disclosed publicly and the investors must

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Comments (11)

Daniel J Pritchett,

Aug 20, 2008

I'm sure this guy contacted you first before rushing to press, right?

Jasongoldberg,

Aug 20, 2008

Sensationalist headline. but has prompted good and thoughtful discussions here http://www.techcrunch.com/2008/08/20/social-median-disregards-60-years-of-securities-regulations-with-sale-of-stock-on-twitter/#comments here http://friendfeed.com/e/c986c4a7-9cbf-c4cd-ad3a-5df0a8f3de9e/socialmedian-is-raising-some-more-angel/ and here http://mashable.com/2008/08/20/socialmedian-twitter-fundraising/

Marchino,

Aug 21, 2008

what a mess!

Abrudtkuhl,

Aug 21, 2008

Arrington is such a dbag

Daniel J Pritchett,

Aug 21, 2008

It took me a few hours to remember that S|M is presenting at TechCrunch50 and then I understood why JGoldberg had been so forgiving about the whole issue ;)