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Smarter Growth Matters

Vol. 1, No. 3
May, 2016

Avoid Working with Unregistered Broker-Dealers

Companies looking to raise money often engage third party “finders” to assist with introductions to potential investors, with companies compensating such finders based on a percentage of the funds invested as a result of such introductions.  When engaging such assistance in raising funds, it is important to be aware of the broker-dealer registration requirements and to avoid working with any finders that are not registered as such.

Any person who is paid for performing any key function in connection with a securities transaction may be subject to broker-dealer registration.  The general rule is that broker-dealers must register with the SEC if they are physically present in the United States, or if, regardless of their location, they effect, induce, or attempt to induce securities transactions with investors in the United States.  Although compensation based on the amount of funds raised in connection with a securities transaction is a key indicator of broker-dealer activity, any person who is compensated for soliciting investors on behalf of an issuer, regardless of whether such compensation is based on the success of such solicitation efforts, may be considered a broker-dealer.

While an issuer is generally not considered to be a broker-dealer with respect to offers or sales of its securities, the activities of persons acting on its behalf may be.  Officers, directors and employees of an issuer are exempt from broker-dealer registration requirements only if such individuals: (i) primarily perform substantial duties for the issuer aside from those connected to securities transactions; (ii) may not participate in a securities offering more than once in a year; and (iii) may not receive transaction-based compensation in connection with the sale of securities.

The potential penalties for failing to register as a broker-dealer when required, or using the services of an unregistered broker-dealer, are serious and can apply to the issuer as well as the unregistered broker-dealer. Such potential penalties include: (i) right of rescission on the part of investors under state or federal law with respect to securities sold by the issuer; (ii) fines, disgorgement and injunctions; and (iii) losing the ability to rely on the Regulation D safe harbor exemption for issuing restricted securities.

A 2013 settlement of an SEC enforcement action against Ranieri Partners, a New York-based private equity firm, its senior Managing Director Donald W. Phillips, and William M. Stephens, an independent consultant hired by the firm who was not a registered broker-dealer, demonstrates the potential outcome of working with an unregistered broker-dealer.  In that settlement, the SEC found that Stephens violated securities laws when he solicited investors for certain private funds managed by Ranieri Partners and received transaction based compensation for his work. As a result of his actions, not only was Stephens barred from working in the securities industry, but each of Phillips and Ranieri Partners was held accountable for aiding and abetting Stephens in his violations because they did not sufficiently limit his activities, resulting in a $75,000 fine for Phillips and a $375,000 fine for Ranieri Partners.

With the potential penalties for using unregistered broker-dealers being as serious as they are, companies should avoid working with any finders if such finders are not registered broker-dealers or associated with registered broker-dealers.  Although the promise of a pipeline to funds to finance a venture for the foreseeable future can be extraordinarily appealing, the substantial risks using an unregistered broker-dealer could bring to the company and its executives far outweigh the benefits funds originating through such a finder can bring.

If you have any questions about this article, please contact Matthew Graber at FGD at (617) 275-4225 or

It is Better to Give than to Receive

Are you an owner of a closely held company? As an tax and/or estate planning measure such an individual can now use their shares of the company to make gifts to charity AND, the gifts will be paid for by the company.

The close held owner receives a charitable deduction, and avoids capital gains tax on the gift.  The gift would have a small economic cost while benefitting a charity of the donor’s desire (individual self – satisfaction and personal contentment should not be understated).

A close held entity holder can gift shares to a charity and take a charitable deduction on the personal Form 1040.  If the value is $10,000 or more a qualified appraisal (also deductible) is required.

The charity, not desiring to be a shareholder in the donor’s business, would seek to sell the shares to the most likely buyer – i.e. the donor’s company.  The company buys back the shares, retires the shares AND, the donor is left in the same ownership position as before the transaction.  The donor will have the personal satisfaction of having given to a charity with whom a strong relationship may exist and after all, it is common knowledge, it is better to give than to receive.

Beware of Traps Being Set for Mobile Web Applications

Inventions for health related data applications (apps) are on the rise.  We all want to track our health data and so do many businesses. Data in this day and age is big business too.  Its fun to track and share with your friends and for businesses to use this data, but beware if you are a business, what traps lay waiting for you to mess up.  Having a good website and other permissions or authorizations in terms and conditions are key to whether or not a person will know and accept that your business may re-use their data.  Concerns over how your company protects that data from cyber attack or mis- use requires your company to have good policies and to police itself with proper IT controls and staff training on HIPAA and HITECH.  Your team must be aware and working to maintain compliance with the state and federal regulators.  There are several key regulators that may lay claim to your application—Does the FDA have a role in your device-they manage patient safety concerns.  It recently released guidance if you considered a medical device but are taking a risk based approach and focusing in on the most dangerous applications, in their view.  Before heading to the market, verify if your application will be classified as a medical device. If so, learn the rules and the requirements that pertain to that classification.

The FTC plays a major role in advertising your application.  They have a good resource called:  Marketing your Mobile App: Get it Right From the Start available at   The FTC has broad authority on data security and privacy as well.  It is very focused on those businesses in the health care industry right now and has brought several cease and desist actions against application developers whose sites or applications did not seek user consent.

Two new entrants on the Mobile App scene are the Office of National Coordinator for Health Information Technology (ONC). This was created under the HITECH Act amendments.  There are some murky areas of oversight between their role and that of the FDA’s, so seeking some guidance is critical. They are also collaborating with the FTC on a health IT Safety Center.  The other is the FCC who is reviewing wireless applications for security best practices and for bandwidth issues. See FCC Health care initiatives.

Also check out Mobile Marketing Association Best Practice and Guiding Principals  for Direct to Consumer Device Advertising for another worthwhile site.

FGD Client Alert:

Unauthorized Trademark Solicitation Notices

Once FGD has filed your trademark application with the United States Patent and Trademark Office (USPTO) to protect your business tag line or product name as part of your branding efforts, you will continue to hear from us, but you may also hear from third parties. Any correspondence you receive from parties other than FGD on behalf of the USPTO is most likely a scam.  Typically, this correspondence offers services for a fee or requests an outright payment.

Do NOT pay any invoices that do not come from FGD on behalf of the USPTO. Be aware that these third parties are not associated with the USPTO or our firm, and often use trademark registration information from the USPTO’s public database to mail or email trademark-related solicitations.

As your legal advisors, FGD’s intellectual property team will keep you apprised of the status of your trademark application. Once a registration certificate has issued, we will send timely follow-up reminders notifying you of upcoming USPTO maintenance filing deadlines. Do not fall prey to unwanted solicitations. If you have any questions about trademark notices that you receive, please contact us before processing any payments.

FGD Client Highlights

logo-jobbleJobble is a part-time job in your pocket. There are some great event marketers who need your help. With the Jobble app you can view posts from businesses looking to hire help for events such as trade shows, fundraisers, concerts, promotional tours, festivals, retail openings, and more.

Jobble also puts the power of recruiting and managing an on-demand workforce in the hands of companies and agencies.  You get the operational efficiencies of a staff management platform plus a professional and vetted on-demand workforce, with ratings and reviews by former employers.  In just a few clicks you can handpick a workforce that best fits your needs, control costs, and manage operations.

Jobble’s mission is to make event marketers live easier by solving one of the biggests problems in event execution; finding and managing temporary help.  Utilizing mobile technology matched with enterprise software to modernize the way businesses hire event help, Jobble is transforming the events space and the way people find event work.

Some event highlights include:  ComicCon, Island Rum, Tech Jam, TUGG and SXSW.  Some notable customers have been:  The Boston Globe, RCN and LovePop Cards.

So if you are an employer looking for event staff or someone looking to find great gigs to work in your area, Jobble is the app for you.  For more information visit:


SUGER is the sweet home of ANGELROX and a fine gift boutique!

Created and curated by designer Roxi Suger and her husband Julian, Suger opened in downtown Biddeford in 2013 as a flagship and showroom for Angelrox and to offer the community an upscale retail experience.  The store brings a taste of New York to southern coastal Maine and offers a wide range of products with many local jewelers and artisans represented.  Suger’s signature collection, Angelrox is also produced in Biddeford in the historic Pepperell Mills and is carried in over 200 boutiques across the country.  The line enjoys a lovely following and is crafted from sustainable sumptuous bamboo, organic cotton and other plant based fibers in essential layers and accessories that gently shape, comfort and love

Suger is committed to charity and contributes to multiple local causes.  Julian and Roxi also create, organize and produce the annual Biddeford Ball, a fundraiser dedicated to showcasing our mill history, Maine Makers and the new era of industry & craft in the USA.

For more information visit the following sites: and

FGD Briefs:

Celebrate entrepreneurship, cultivate creativity and drive high-impact innovation


Maine Startup and Create Week is more than just moderated panels and keynote presentations. From eating and drinking to networking and learning, there’s something for everyone.

Pitch Your Startup to Investors

New for 2016, we will have a private pitch event where you can connect with every investor in attendance (and more). Space is limited to 30, so sign up now.

Open Call for Food Show Vendors

Join us at the second annual Maine Startup and Create Week Food Show. Get your product in front of entrepreneurs, journalists, consumers, innovators, and investors! Priority will be given to submissions received by May 16th.

List Your Affiliate Event

Local organizations and companies are encouraged to host partner events during Maine Startup and Create Week. A partner event is independently organized, related to growing and scaling a business, and does not conflict with the conference schedule.

To find out more information and to purchase tickets visit:


FGD will be sponsoring the 3rd annual Biddeford Ball charity benefit that will be held on Saturday June 18th  at the Saco Mill #4 located on Factory Island – 12 Main Street, Saco from 7pm-midnight. This year the proceeds will be used to Feed Our Future and help prevent hunger in Maine. For more information and to purchase tickets visit:


FGD Law actively supports quality of life endeavors within the communities our colleagues live and work. The annual Biddeford-Saco ArtWalk is a favorite of all our team. The concept is based on Portland, Maine’s successful “First Friday”. The downtown group ‘Heart of Biddeford’ and other volunteers have grown it into an ongoing monthly event – taking place on the last Friday of each month, from April to October.


Recently, FGD hosted the work of Biddeford High School student’s grades 9-12.  The show , held on April 29th, consisted of ceramics, embellished wire sun catcher’s, monumental, and realistic portraits, landscape drawings, and paintings.

Innovation Breakfast Series