William Carleton, Counselor @ Law

Same-sex marriage and the accredited investor standard

2013-05-22T10:15:21-07:00

A question this morning from a client about the accredited investor standard for married couples got me thinking: here is yet one more compelling reason for marriage equality in the United States.

The standard in question reads like this:

"(a) Accredited investor. Accredited investor shall mean any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person:

. . .

"(5) Any natural person whose individual net worth, or joint net worth with that person's spouse, exceeds $1,000,000 [excluding the person's primary residence]. . . .

"(6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year[.]"

Presuming I'm correct to assume that the normative denotation of "spouse" implies marriage, couples in civil unions would not be "spouses" to one another. If the couple wished to be married, but state law didn't permit them to be, then they would be shut out of the ability to combine income or net worth to meet what is effectively a lower accredited investor standard for married couples.

That sounds like discrimination on the basis of sexual orientation, and may violate the Equal Protection Clause of the Constitution.

Well, we know the accredited investor definition and standards are going to be the focus of regulatory revision, sooner than most of us otherwise want, probably. That being the case, a non-discriminatory standard should be changed to refer, not to "spouses," but to "partners."

Or maybe the staff could issue an interpretive release to say that it construes "spouse" to mean couples who are married or, where the law does not allow same sex couples to marry, same-sex couples.

Photo: 1st Marriage Licenses, King County, Washington / Flickr.

Boldly embracing one's vowel-deficient ways

2013-05-21T11:25:42-07:00

I saw somebody on Twitter quote the comedian Albert Brooks, to the effect that Yahoo should next spend some money to buy a vowel (Tumblr being a second, prominent acquisition of a company that lacked the letter "e" in its name; Flickr being the first).

So I thought this Flickr ad, which I got by mail today, was especially funny.

If you don't got it, flaunt your lack of it!

House bill to impose a deadline on SEC JOBS Act rulemaking is narrower than you might think

2013-05-20T07:34:43-07:00

My ears perked up when I heard that the House of Representatives had passed another bill introduced by Representative Patrick McHenry of North Carolina.

Rep. McHenry appears to be mastering the craft of getting bills through with wide bipartisan support. This bill, HR 701, passed the House by a vote of 416 to 6, which is as strong or stronger than the vote supporting his original investment crowdfunding exemption (which, alas, never made it into the JOBS Act - the Senate substituted a different equity crowdfunding exemption, and not one that any rules will be able to implement, in my view).

Rep. McHenry knows how to be partisan, too, however. He dishes out more than his share of rhetorical outrage over how long it is taking the SEC to implement those provisions of the JOBS Act that Congress specified should not take effect on the passage of the law, but instead should wait on rulemaking for implementation.

That rhetoric is tapped into in the messaging around HR 701. Here's an official statement from Rep. McHenry's office about the bill:

“'To cultivate a stronger economy, we have to build a more vibrant marketplace for our startups and entrepreneurs, which is what this legislation is all about,' said Congressman McHenry. 'It’s critical that the SEC finally start to implement the JOBS Act – a bipartisan bill that was signed into law more than a year ago. Small businesses and entrepreneurs are starving for capital, and this legislation simply sets a firm deadline for the SEC to get its job done.'”

But in fact the bill only specifies a deadlne of October 2013 for the SEC to write rules on the changes to Regulation A that were authorized under Title IV of the JOBS Act. The bill does not speak to the lack, to date, of rules to implement the JOBS Act Title II lifting of the ban on general solicitation for Rule 506 offerings that are limited to accredited investors. Nor does it address implementation of non-accredited investment crowdfunding under Title III of the JOBS Act. Congressional deadlines to get rulemaking done on those initiatives have been missed.

A re-vitalized Reg A, with a cap of $50 million, could end up being a big deal. But it appears to have been targeted as the vehicle for this bill because the original JOBS Act never specified a deadline for Reg A rulemaking.

Photo: Digital Game Museum / Flickr.

Short videos from Maker Faire 2013

2013-05-19T18:19:19-07:00

Another beautiful, sunny day in San Mateo!

I put about a dozen, short videos taken yesterday and today onto a YouTube playlist.

This one (below) is probably the sweetest - a couple interacts across a kind of windmill made of mirrors.

Maker Faire 2013 - Saturday

2013-05-18T16:02:33-07:00

It's sunny and 70 degrees in San Mateo as I write this at 3:49 pm.

I'm at Maker Faire, volunteering for friends and, by turns, wandering about.

Pictured are a few of the happenings I've seen so far today.

The most interesting lend themselves to short video, which I am posting to YouTube via the Capture app, which is a godsend.

The shiny new Asus server, I want to swap out my Dell at work for that. The letterpress pictured is steam powered!

I had a great roast pork sandwich from a food truck that said it was from San Francisco, General something-or-other. Taiwanese, the truck said. Steamed pr baked. The presentation was superb, as good as I'd expect at the foodie places I like in Seattle. The top of the bun was off center, to showcase a layer of meat on the bottom bun, topped by a thicket of cut cabbage and mustard seed. Was delicious before I took a bite. That's not pictured.

Speed and distance

2013-05-17T08:40:53-07:00

During the flight down from Seattle to San Francisco this morning, I watched a commercial jet flying north, the opposite direction. It was moving fast, much faster than I'm used to seeing planes fly when watching from the ground.

Hard to say how far the fast jet was from where I sat, but, from its relative size in my eye, it looked farther than jets typically fly over Seattle approaching SeaTac.

I told myself that the fact that my plane was moving in the opposite direction accounted for (at least some of) the impression of the other jet's unusual speed. That is, although I felt I was viewing from a fixed position, in fact I was not. The two planes were pulling away from each other, but my eye was attributing all of the speed to the other plane.

But that other plane still looked like it was moving three times faster than normal.

Some minutes later, I focused my attention to a dotted line of waves on the California coast. For many beats, they were as still in my eye as they are in this picture. Even when I finally picked up some movement, it was within a single wave, not the entire formation.

Weird. I know waves move slowly, even from the perspective of pier or beach, but I can't account for the perception of stasis from, what, 37,000 feet.

More notes from the plane trip: as we approached the San Francisco airport from the south, the plane rode along the edge of a cloud bank, such that I could see the bright sky and white topped surface of the clouds in the top half of the frame, as it were, and the marsh and muddy water of the overcast East Bay at the bottom. It was oddly beautiful, and a study in the diffraction of light.

I wished I had the gumption to snap a photo of that, but the protocol of course is to have your phone shut down during landing (think of all the landing photos that will be on Flickr once that rule is changed!). Then again, the camera wouldn't have been able to deal with the contrast.

Maker Faire 2013

2013-05-16T18:47:03-07:00

Sorry for the lateness of today's post.

Tomorrow I'm heading to San Mateo for the 2013 Maker Faire.

It's a working visit, so I won't be at total leisure to blog about everything I see; but I'm sure my posts for the next few days will center around the Faire.

Today's picture is not about the Faire, not directly. It's a detail from a Ken Kelly painting, Fairy Tale, 1988, that I spied this afternoon in the hallways of the Perkins Coie law firm in Seattle, where I am attending a reception.

Light reading

2013-05-15T12:51:13-07:00

Last night I participated in a "legal best practices" panel at the new WIN Reactor space (near the Seattle Art Museum Sculpture Park).

I'm just getting to know about the Reactor program. Its head, Chip Hallett, described it as a "launch incubator" for startups in the game industry.

The panel was a mix of lawyers and game company founders/CEOs. As anyone would expect going in, the founders/CEOs were more interesting to hear. (That said, Seattle attorney Scott Warner did an uncommonly good job of moderating the discussion; he'd be a good moderator even when the topic isn't legal).

I think the whole show (long – 2 1/2 hours?) is preserved for posterity on video - I can actually see it being a good resource for first time game startup entrepreneurs, because Scott was so careful to cover all the basic topics - so I sure as heck won't attempt anything like a recap here.

What I do want to remark on briefly: the answers the CEOs/founders gave to one of Scott's questions, to the effect of, do you read all the legal contracts that affect your business?

Bob Berry of Uber Entertainment, Matt Wilson of Detonator Games, and Randy Chung of Zhurosoft, each said, yes, of course, every line, you have to.

I knew this is the answer Bob would give, as I and my firm represent Uber and know his style. But I was impressed to hear Matt and Randy equally adamant.

Sensing that he had hit an especially rich vein in the silver mine, Scott pressed everyone for examples of where contracts go wrong, issues presented or sections and legal contracts to be especially wary of. Everyone had great examples. We got into not just legal drafting "gotchas" but also the nitty-gritty of payment terms and how important it is to spell out unspoken assumptions.

If I come across a link to the video archive, I'll try to remember to post it here.

I'll leave you with a link to a video calling card that Bob kindly created for me in the span of about 90 seconds, using a fun app created by a startup which is part of the current WIN/Reactor class, Freak'n Genius. It had me in stitches.

Photo courtesy of Julian Allen, REACTOR community manager.

The future of angel investing and venture capital fund formation

2013-05-14T09:19:26-07:00

Important post by Joe Bartlett on VC Experts this morning: Joe's take on the future of both angel investing and venture capital fund formation.

It will be, Joe says, aggregation of capital by funds formed online, which permit investors to cherry pick what deals they want to participate in (indirectly, through an investment-specific fund).

The no-action letters secured recently by FundersClub and AngelList validate (most) of the necessary legal framework, but Joe sees the successful funds of the future as perhaps being more niche specific - "each Super Platform will aggregate investment opportunities by specific categories … e.g., medical devices; robotics; solar power; wind power; bio-pharma; clean tech; spin outs from a specific academic center's lab . . . ."

I love seeing how Joe puts all the pieces together.

What I like most about this post, though, is this paragraph of quintessential Bartlett prose about the age in which we live (diction note: "gazelle" is a Bartlett term for an emerging growth company):

"There is a high level of agreement among scientists and techies with the proposition that the next few decades (and, of course, beyond) will experience a worldwide (and principally in the U.S.) explosion of inventions and discoveries capable of giving birth to a multitude of promising Gazelles. The curve is accelerating upwards, approaching a 90 degree angle. The advances in communications, information technology, manufacturing, robotics, alternative energy, biotech, nanotechnology, agribusiness, mental health, transportation, etc. are multiplying geometrically, as theorists, physical scientists, mathematicians and technicians continue to expand the envelope to realms which once were the province of science fiction writers. You needn't go to the limits (or, better, the lack thereof) to which Ray Kurzweil's Singularity University is pushing the boundaries to accept the premise of the science and tech expansion, continuing a curve which has been building since the Enlightenment."

We ain't so special. Tomorrow is.

Photo: Swamibu / Flickr.

Sheryl Sandberg's Silicon Valley HR

2013-05-13T06:30:24-07:00

For Mother's Day, I finished reading Sheryl Sandberg's book, Lean In.

Sandberg gives advice that she expressly admits (she hopes, I hope, we all hope) will be dated within the lifetimes of our children, if not sooner.

For instance, she advises women to conduct job negotiations following an approach she attributes to a Harvard Professor Hannah Riley Bowles: first, they must be "nice," and second, they must justify their requests. Men needn't bother. "I understand the paradox," Sandberg acknowledges, "of advising women to change the world by adhering to biased rules and expectations."

That's bold.

She also describes some non-conventional HR practices she has followed as an executive, including a willingness to ask women about their plans for children, sometimes even in a job interview context.

That's bolder.

Late in the book, she reflects on how employment discrimination law presents an impediment to frank discussion about issues that directly impact the ability of employers and employees to discuss where family and professional lives will intersect:

"The first time I asked a prospective employee if she was considering having children soon, I understood that doing so could expose me and my company to legal risk. Unlike many women, I was in a position to evaluate this risk and chose to take it. The laws that protect women and minorities and people with disabilities, among others, from discrimination are essential, and I am not suggesting they be circumvented. But I have also witnessed firsthand how they can have a chilling effect of discourse, sometimes even to the detriment of the people they are designed to defend. I don't have a solution to this dilemma and will leave it to public policy and legal experts to solve. I do think this is worth some serious attention so we can find a way to deal with these issues in a way that protects but doesn't suppress."

A lot to unpack there.

Image from Google Maps.