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In general, the unregistered "general solicitation" for the purchase of securities is prohibited. You can't go on TV and ask people to buy your stock in exchang
by elbasti 10y ago
In general, the unregistered "general solicitation" for the purchase of securities is prohibited. You can't go on TV and ask people to buy your stock in exchange for money unless you have registered to do so--an IPO or subsequent S1.
Stock is certainly a security. Stock options are just call options of a security, and also a security. Obviously there is some (future, conditional) value implied since it's a reward.
It doesn't really matter whether you are trading stock for dollars, or work, or fb likes, or whatever--it's still a general solicitation because they are being traded for something.
Caveat:
I'm not a lawyer but I have been involved in startups in the space for many years.
- nv-vn 10y agoWell he was just referring people to sign up for the website. The money was money he spent advertising the website(?), so the money only went to getting new members. The stocks were given as the reward for the most sign ups, not in exchange for money.
- elbasti 10y agoThe point is that the stock was exchanged for something (referrals, marketing, etc), and that the contest was announced (ie, general solicitation). That no cash traded hands doesn't matter. There is precedent of an almost identical enforcement action by the SEC, but my google fu is failing me.
- deleted 10y ago[deleted]
- throwawaylalala 10y agoWould be Jet.com's issue, not the guy.
- elbasti 10y agoThat is correct.
- 6clotr1ckg 10y agoCan a startup publicly recruit with the promise of stock as compensation?
- jjallen 10y agoYou can sell securities to non-accredited investors if you have audited financials (basically conforming to public IPO requirements) and the number of people you do so is greatly limited. This stuff is more complicated than I'm making it seem, but small quantities, again with audited financials (minimum audit costs ~$10K) and this can be possible/legal. Definitely consult securities lawyers if you're considering doing anything like this.
- vessenes 10y agoI think the traded for something angle is key here. And, of course, SEC is generally happy when consumers benefit, and fines when they don't. But, I would think a line of defense would be that participants knew they wouldn't necessarily get anything for participating and presumably agreed to that in contest terms. At that point, the contest is just a giveaway -- and you can, in fact, give away stock.