Presentation delivered by Brian Korn, Partner at Manatt, Phelps & Phillips, LLP at FinFair 2015 According to Brian Korn, “Reg A+ ushers in a new type of quasi-public offering that breaks the classic dichotomy of registered public offering or private placement. It is also a novel opportunity for small business lending platforms to raise capital from both accredited and non-accredited investors without becoming fully registered public companies.” In this presentation, Korn shows how Reg A+ is being utilized to create payment-dependent notes and engineer new retail fixed-income products.

1. July 29, 2015
Brian S. Korn
*Some assembly required
Regulation A+ and the New Fixed-Income
Retail Marketplace*
FinFair 2015
New York

2. 2In the beginning…

3. 3JOBS Act Overview
 Crowdfunding – online fundraising…but there’s a catch
 Regulation A+ - from $5mm to $50 mm
 Private Placement Reforms
– General Solicitation relaxed – effective Sept. 23, 2013
– Enhanced verification of Accredited Investors if Soliciting
 “Go Public” Shareholder Thresholds Increased
 IPO On-Ramp and Emerging Growth Companies
 Relaxation on Research Restrictions
 Decimalization – possible move to $.09 tick increments
 Prospective Issuer Outreach
 Signed into law April 5, 2012
“To increase American job creation and economic growth by improving access to
the public capital markets for emerging growth companies.”

4. 4(Old) Regulation A
 Small offering exemption
 Up to $5 million may be offered to the public regardless of accredited
investor status
 Offering Circular must be used and filed with the SEC
 SEC must approve OC before offering is priced
 Seldom used because:
– no state securities law preemption
– for nearly the same effort, one can do an IPO and qualify for reduced reporting under the
Smaller Reporting Company Rules
 JOBS Act 2012 - Title IV – increased to $50 million and enabled SEC to
grant state law preemption
– New Regulation A took effect June 19 with full state law preemption at the Tier 2 level

5. 5
Unregistered Offering Exemptions Generally
Feature Public Crowdfunding
(Title III)
Regulation A+
(Tier 1)
Regulation A+
(Tier 2)
Private Placements Including
Title II Crowdfunding
(Regulation D Rule 506 (b/c))
Maximum Total
Raised
$1 million per 12 month
period
$20 million per 12
month period; including
up to $6 million for
selling shareholders
$50 million per 12 month period;
including up to $15 million for
selling shareholders
Unlimited

Number of
Investors
Unlimited but subject to
maximum total raised
Unrestricted

Unrestricted

Unlimited accredited investors; up
to 35 non-accredited investors
unless soliciting (if soliciting- 0
non-accreds)

Investment Per
Investor
Restricted by income/net
worth
Unrestricted

Restricted by income/net worth Unrestricted

Investor
Disclosure
Required, must be filed
with SEC
Required, must be filed
with SEC
Required, must be filed with SEC Not required if all accredited
investors; Form D filing proposed

Intermediary
Required
Yes – broker/dealer or
funding portal
No

No

No

Subject to
ongoing SEC
reporting
following raise
Yes, at least annually,
possibly more frequently
No; as long as exit
report is filed not later
than 30 calendar days
after termination or
completion
Yes; audited financials filed
annually; annual, semi-annual,
current reporting required
May file exit report, so long as
issuer meets certain qualifications
No


6. 6
Regulation A+ vs. Regulation D vs. Other Exemptions
Feature Public Crowdfunding Regulation A+
(Tier 1)
Regulation A+
(Tier 2)
Private Placements
(Regulation D Rule 506 (b/c))
Disclosure Liability Yes, full disclosure
liability with a
knowledge exception
Yes, full disclosure liability
with a knowledge exception
Yes, full disclosure liability with a
knowledge exception
Only anti-fraud liability

Shares restricted Yes, for one year No

No

Yes, for public companies most
can sell under Rule 144 after
six months
State Filing Possibly, depends on
future rules by state
Not exempt from state
securities law registration
and qualification
Exempt from state securities law
registration and qualification if
sold to “qualified purchasers,”
defined to include all offerees in a
Regulation A offering and all
purchasers in a Tier 2 offering
Usually no if only offering to
accredited investors

Advertising and
general solicitation
Not allowed "Testing the waters"
permitted before filing;
general solicitation
permitted after qualification

"Testing the waters" permitted
before filing; general solicitation
permitted after qualification

Allowed if sales are made only
to accredited investors and
issuer takes reasonable steps
to verify accredited status
Can public cos.,
foreign issuers,
investment
companies and
exempt inv.
companies issue
No No public companies No public companies Yes


7. 7
Feature Regulation A+
(Tier 1)
Regulation A+
(Tier 2)
2,000 Stockholder
“Forced Public” Rule
(Section 12(g))
•Tier 1 shares count towards forced public cap
of 2,000 maximum holders/500 maximum non-
accredited (must also have $10 million of total
assets to be “forced public”) Tier 2 shares are
disregarded provided the issuer:continues to
make Tier 2 reports and is current in such
reports;
•engages a transfer agent; and
•has less than $75 million public float at end of
last semiannual period, or if no float, revenues
below $50 million as of most recently completed
fiscal year
•Tier 1 shares count towards forced public cap of 2,000
maximum holders/500 maximum non-accredited (must also
have $10 million of total assets to be “forced public”) Tier 2
shares are disregarded provided the issuer:continues to
make Tier 2 reports and is current in such reports;
•engages a transfer agent; and
•has less than $75 million public float at end of last
semiannual period, or if no float, revenues below $50
million as of most recently completed fiscal year
Offering Circular Form 1-A, filed publicly on EDGAR at least 21 days
prior to solicitation; SEC clearance required before
sales can be made
Same at Tier 1
Exit, Annual, Semiannual
and Current Event Reports
1-Z exit report 30 days after termination 1-Z – Exit Report 1-K – Annual Report
1-SA – Semiannual Report
1-C – Current Report
Financial Statements Two years, audit not required Two years, audit required

8. 8Typical Fixed-Income Retail Structure
Platform
Lender
Captive
Fund
Sidecar Investors
(Accred or
Institutions)
Borrower
Loan
Participations
- Marketing
- Origination
- Licensing
- Loan Custody
Arrangements
- Servicing
 Bills Borrower
 Pays Investors
- Loan
- Collateral
$
Monthly Payments
SPV I
(DE LLC)
- Borrower Payment
Dependent Notes
- Investment Agreement
- Private Placement Memo
or Prospectus
LP Investors
(Accred)
GP LLC
1
2
3
GP
BPDN
Investors
(Accred or Retail)

9. 9
ABOUT THE PRESENTER
Impact Investing| Manatt, Phelps & Phillips, LLP

10. 10
Impact Investing | Manatt, Phelps & Phillips, LLP
Brian Korn
Partner
• Capital Markets
• Peer-to-Peer Lending
and Crowdfunding
212.790.4510
bkorn@manatt.com
PROFESSIONAL EXPERIENCE
Brian S. Korn is a partner in the Capital Markets practice group and is resident in the New York
office. His practice focuses on corporate finance transactions, including initial public offerings
(IPOs), early-stage and start up venture financings, and mature corporate and high-yield debt
finance. He also advises clients on SEC compliance, broker-dealer compliance and corporate swap
transactions. He is also a recognized thought leader in the marketplace online lending (or peer-to-
peer lending) and crowdfinance fields and is a prolific speaker and writer in the field.
Mr. Korn has previously served as head of Equity Capital Markets and Syndicate Compliance at
Barclays Capital and as senior vice president and assistant general counsel at Citigroup Global
Markets, Inc. He has extensive experience representing issuers and underwriters in investment
banking and capital markets transactions, including transactions involving equity, debt,
hybrid/convertible and preferred securities, derivatives and foreign exchange. He has executed
several IPOs and other equity value monetization transactions, such as spin-offs, split-offs and
carveout transactions. He also has extensive experience in sponsor-leveraged buyouts and
bank/bond acquisition financing.
EDUCATION
 Northwestern University School of Law, J.D., 1997.
Note and comment editor, Northwestern Journal of International Law & Business.
 University of California, Berkeley, B.A., with honors and distinction, 1993.
Brian Korn