Regulation A+ words you must not use in your marketing, get more guidance from your attorney.
TestingTheWaters(TM) Marketing Bad Words/Sounds/Images Dictionary
This guidance applies to all marketing materials, whether used in TTW or post-qualification marketing.
“Approve”: The SEC doesn’t approve Regulation A offerings, it reviews them and then qualifies them. The SEC requires the Offering Circular to bear a legend which specifically states that the SEC isn’t approving or passing on the merits of the securities offered. Avoid any wording that implies the SEC has approved, signed off on, given the green light, or anything that even hints of approbation or any degree of merit.
“Amazing”: Avoid this and similar over-the-top statements.
“Commit”: A no-no whether you are talking about the potential investor or the issuer. Neither is committing to anything. Avoid any wording that implies that there is an obligation to buy or to sell, even on a conditional basis. There isn’t even an obligation to offer the securities to the person who indicated interest. Alternatives are anything that denotes indications of interest on the part of the potential investor, or an undertaking that the issuer will get more information to the potential investor at the appropriate time. “Soft commitment” is also out.
“Get in on the ground floor”: In TTW, this is problematic if it holds out a promise of getting in the ground floor. There is no assurance that the company will do the offering or that the particular investor will get a chance at investing. Things like “you might have a chance at getting in on the ground floor” or “want to get in on the ground floor?” are better. It’s the promise that the potential investor will get shares that is the problem here. Getting in on the ground floor is less problematic when the company has actually filed with the SEC.
“Golden”: No golden opportunities, or anything else redolent of treasure or riches. “Exciting” opportunities are ok, while golden seems to imply a positive return.
“Invest”: At the TTW stage this is a problem. No-one is investing at the TTW stage. Be especially careful of NEVER using this word on or near the button that you click to indicate interest. Technically this should be something along the lines of “indicate interest” but that’s boring so things like “tell me more,” “support,” “show the love” will work. “Might like to invest in the future” is fine, so long as the word “invest” isn’t highlighted or put in a larger font. Try to make sure that if there is an “indicate interest” button, the General Statement (see TTW Legends) or something like it appears somewhere close, that the potential investor is likely to see.
“Investor”: No-one is an investor until the Offering Statement is qualified by the SEC. They are “potential investors,” “people who have indicated interest,” “supporters” and the like.
“Jackpot”: Nothing that would be appropriate in a casino. Nothing like “ace” either. Gambling-type words (except where the implication is that losing everything is possible) are taboo.
“Mini-IPO”: A Reg A offering is NOT an IPO, mini or otherwise. It is an exempt public offering. In an IPO the company goes through a full SEC review on the basis of a much more extensive set of disclosure requirements, including a more thorough audit in accordance with PCAOB standards. There’s generally an underwriter who acts as a gatekeeper in terms of insisting on a counsel’s opinion as to disclosure, and all parties are subject to a higher level of liability. At the end of the process, there is likely to be a trading market. None of these things are true in a Reg A offering.
“Next Facebook”: Only Mark Zuckerberg can say anything about being the next Facebook (or the next other successful company) and then only in limited circumstances, like he’s setting up something similar, in similar circumstances.
“Now”: Avoid all words and phrases that imply urgency, suggest that the potential investor might miss the boat. No “Invest Now!” or “Invest Today!” Several clients use “Invest Now” buttons, though.
“Once in a Lifetime”: Avoid all hype like this. It sounds both urgent and promising of rewards. Substitute “unique,” “interesting” or even
“Promising”: Avoid this word if it’s connected to the possibility of profits or success. Try to use some variant of “potential” instead.
“Profits/profitable”: Do not let the company say anything about future profits to investors, or returns to investors. If there are projections showing that the company itself will make profits, then you can let the company say something along the lines of “if we meet the targets in the projections/if the assumptions in the projections are correct then we could show a profit by 201X”, but make sure that any forward-looking statement of this kind is (a) conditional (“if”, “assuming”, etc.) and (b) is accompanied by the Forward-Looking Information Legend. Do not let the company make statements about profits to investors, or returns to investors or anything along those lines.
“Reserve”: This implies an obligation and is probably as much of a contract problem as a securities law problem. It must be clear there is no commitment. While you can’t say “reserve me $XX worth of shares” it IS ok to say “I would be interested in $XX of shares.” “Register” is a much better word. FINRA member brokers know that FINRA has a problem with this term and generally use the phrase “indicate interest.”
“Save”: If used in phrases like “save some shares for me”, you have all the same problems as “reserve”.
“Success”: Problematic if promising future success or profitability.
“Today”: See “now”.
“Solid”: When used in the context of the company’s prospects or performance, this is problematic. It implies that the company is likely to survive, which startups just aren’t. Suggest other words based on the company’s performance to date, or on the experience of management. Never use “solid” in conjunction with profits. Too vague and promises significant upside.
“Unmatched”: It sounds a bit like “unique” but seems more problematic, because it implies quality or performance. Every investment opportunity is unique, by its nature, but unmatched implies that nothing else is as good.
“Winner”: Nothing that implies certainty of returns.
Cash register noise.
Upward swooshing noise when accompanied by visual implying upward profit trend or stock price.
Currency. No images of people holding dollar bills, waving dollar bills, rolling in dollar bills (this also encompasses cats) and dollar bills in general. This includes no graphics of dollar bills or dollar signs multiplying. Just try to avoid currency (whether paper or coin) completely.
No big graph-style arrows heading upwards unless they reflect the graphic depiction of actual (not projected) results of some kind, and especially not if it looks like some kind of prediction as to revenues or profits or stock price.
Reg A Legends
FORWARD-LOOKING STATEMENT LEGEND: THIS MUST APPEAR ON SLIDE DECK, VIDEO, OR ANYWHERE ELSE THAT PROJECTIONS OR FORWARD-LOOKING INFORMATION IS USED.
THE [OFFERING MATERIALS] MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
GENERAL STATEMENT ABOUT “TESTING THE WATERS”: ADD THIS (OR LINK TO IT) FROM ANY COMMUNICATIONS AND MAKE SURE THAT POTENTIAL INVESTOR SEES THIS (AND PREFERABLY CLICKS TO SHOW THEY UNDERSTAND) BEFORE THEY CAN CLICK ANY INDICATION OF INTEREST BUTTON:
THE COMPANY IS “TESTING THE WATERS” UNDER REGULATION A UNDER THE SECURITIES ACT OF 1933. THIS PROCESS ALLOWS COMPANIES TO DETERMINE WHETHER THERE MAY BE INTEREST IN AN EVENTUAL OFFERING OF ITS SECURITIES. THE COMPANY IS NOT UNDER ANY OBLIGATION TO MAKE AN OFFERING UNDER REGULATION A. IT MAY CHOOSE TO MAKE AN OFFERING TO SOME, BUT NOT ALL, OF THE PEOPLE WHO INDICATE AN INTEREST IN INVESTING, AND THAT OFFERING MIGHT NOT BE MADE UNDER REGULATION A. IF THE COMPANY DOES GO AHEAD WITH AN OFFERING, IT WILL ONLY BE ABLE TO MAKE SALES AFTER IT HAS FILED AN OFFERING STATEMENT WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) AND THE SEC HAS “QUALIFIED” THE OFFERING STATEMENT. THE INFORMATION IN THAT OFFERING STATEMENT WILL BE MORE COMPLETE THAN THE INFORMATION THE COMPANY IS PROVIDING NOW, AND COULD DIFFER IN IMPORTANT WAYS. YOU MUST READ THE DOCUMENTS FILED WITH THE SEC BEFORE INVESTING.
SEC REQUIREMENTS; MAKE SURE THIS INFORMATION HAS BEEN SEEN AND PREFERABLY AGREED TO PRIOR TO PERMITTING POTENTIAL INVESTOR TO INDICATE INTEREST [THIS IS SEC LANGUAGE AND CANNOT BE TWEAKED]:
NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED, AND IF SENT IN RESPONSE, WILL NOT BE ACCEPTED.
NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED UNTIL THE OFFERING STATEMENT FILED BY THE COMPANY WITH THE SEC HAS BEEN QUALIFIED BY THE SEC. ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME BEFORE NOTICE OF ACCEPTANCE GIVEN AFTER THE DATE OF QUALIFICATION.
AN INDICATION OF INTEREST INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND.
[AFTER THE OFFERING STATEMENT HAS BEEN PUBLICLY FILED:]1 AN OFFERING STATEMENT REGARDING THIS OFFERING HAS BEEN FILED WITH THE SEC. [THE PRELIMINARY OFFERING CIRCULAR THAT IS PART OF THAT OFFERING STATEMENT IS ATTACHED] OR 2 [YOU MAY OBTAIN A COPY OF THE PRELIMINARY OFFERING CIRCULAR THAT IS PART OF THAT OFFERING STATEMENT FROM:
[NAME, PHONE NUMBER, ADDRESS] OR
POST-QUALIFICATION. THE SEC REQUIRES THAT OFFERS BE PRECEDED BY OR ACCOMPANIED BY AN OFFERING CIRCULAR, BUT DOESN’T PRESCRIBE LEGEND LANGUAGE. THE FOLLOWING IS DRAFTED BY SPH; THE COMPANY OR ITS ADVISERS ARE ALLOWED TO TWEAK IT:
AN OFFERING STATEMENT REGARDING THIS OFFERING HAS BEEN FILED WITH THE SEC. THE SEC HAS QUALIFIED THAT OFFERING STATEMENT, WHICH ONLY MEANS THAT THE COMPANY MAY MAKE SALES OF THE SECURITIES DESCRIBED BY THE OFFERING STATEMENT. IT DOES NOT MEAN THAT THE SEC HAS APPROVED, PASSED UPON THE MERITS OR PASSED UPON THE ACCURACY OR COMPLETENESS OF THE INFORMATION IN THE OFFERING STATEMENT. YOU MAY OBTAIN A COPY OF THE OFFERING CIRCULAR THAT IS PART OF THAT OFFERING STATEMENT FROM:
[NAME, PHONE NUMBER, ADDRESS] OR AT WWW.[URL]]
YOU SHOULD READ THE OFFERING CIRCULAR BEFORE MAKING ANY INVESTMENT.
1 The bit in asterisks is an instruction, not part of the legend.
2 This is either/or. You can either deliver the OC together with the communication that bears this legend, or link to the OC (more likely). If the OC isn’t being delivered, take out the first bit and just keep the bit that links to the OC.