AngelList and FundersClub both recently requested and received “no action” relief from the SEC staff. “No action” letters are often complicated and the law surrounding the discussion is extremely opaque. We have sought to set out the implications of the relief granted by the staff at the SEC as well as a summary of the type of structures the two companies intend to employ, the assumptions upon which they requested and were granted relief and a number of other salient points.
What is a no action letter and does it have the force of law?
A “no action letter” does not have the force of law.
An individual or entity who is not certain whether a particular product, service, or action would constitute a violation of the federal securities law may request a “no-action” letter from the SEC staff. Most no-action letters describe the request, analyze the particular facts and circumstances involved, discuss applicable laws and rules, and, if the staff grants the request for no action, concludes that the SEC staff would not recommend that the Commission take enforcement action against the requester based on the facts and representations described in the individual’s or entity’s original letter.