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Happy Thanksgiving Holiday to our Clients, Friends and Colleagues!

 

Dear Clients, Friends and Colleagues,

During Thanksgiving we all reflect on the things for which we are most grateful. All of us at Gellis Law Group are especially thankful for your trust and the opportunity to help you, your companies, and ventures to reach your business and financial goals and strive for a better future.  We wish you and your loved ones a happy holiday!

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George A. GellisHappy Thanksgiving Holiday to our Clients, Friends and Colleagues!
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New York City Regulation Banning Salary History Inquiries Takes Effect

This is an update for all clients of our Firm that have offices or operations in New York City. Effective October 31, 2017, it is illegal for public and private employers of any size in New York City to ask job applicant’s salary history during the hiring process.  Same requirement applies to advertisements for positions, on applications, or job interviews. This newly promulgated ban prohibits all employers from inquiring about past compensation, including salary, bonuses and benefits. It further bars employers from conducting searches of public records for the purpose of obtaining salary history.  The new regulation makes it illegal to rely on salary history in determining what salary and/or benefits to offer applicants.

Please let us know if you have any questions regarding this new requirement.  Direct your inquiries to either ggellis@gellisgroup.com or mweiner@gellisgroup.com.  Thank you.

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George A. GellisNew York City Regulation Banning Salary History Inquiries Takes Effect
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SEC filed its first ICO-related Enforcement Action in the United States

Over the past year, the issue of Initial Coin Offerings came to the forefront of attention of financial institutions and consumers alike. While there have been some developments on this front over the past five months, on September 29, 2017, the SEC filed its first ICO-related enforcement actionSEC v. REcoin Group Foundation, LLCet al., No. 17 Civ. 5725, in the Eastern District of New York. This action seemingly represents the SEC’s first formal enforcement proceeding against an issuer of digital tokens.

As part of the action against Maksim Zaslavskiy and his related companies, the SEC also sought and obtained orders freezing the defendants’ assets. In the complaint related to this case, the SEC alleged that the President and sole owner of the two corporate defendants, fraudulently raised at least $300,000 related to two (2) ICOs, for which no SEC registration statements were filed (nor registration exemption applicable). Tokens issued in the ICOs were purportedly backed by investments in real estate and diamonds.

The SEC alleges, however, that neither company had any significant operations. Specifically, it seems that with respect to REcoin, Mr. Zaslavskiy allegedly claimed that the company was ready to invest the ICO proceeds in real estate, and that REcoin had raised between $2 million and $4 million, while in fact no more than $300,000 was raised. With respect to the second corporate defendant, Diamond Reserve Club, Mr. Zaslaviskiy allegedly marketed “memberships in a club” that invests in diamonds and obtains discounts with product retailers to “skirt the registration requirements of the federal securities laws.”  The complaint alleges that the advertised “‘memberships’ were in all material respects identical to the ownership attributes of purchasing the purported ‘tokens’ or ‘coins,’ which are viewed as securities by the SEC.  Notably, it seems that neither business entity was involved in any business operations aside from soliciting funds.

SEC took the position that the tokens that REcoin and Diamond Reserve Club purported to—but never in fact did—create or sell are in fact securities subject to their jurisdiction.  The SEC further noted that the stated purpose of the tokens sold in each ICO was to acquire assets that “would generate returns for investors stemming from . . . the appreciation in value of the REcoin and Diamond tokens as the Companies’ businesses grew [due] to the managerial efforts of teams of ‘experts’.”

For any of our clients contemplating structuring, marketing, and consummating an ICO, we would like to point out that the SEC gave particular attention in this enforcement action to statements about the ICOs and tokens that appeared in the whitepaper prepared for each ICO and in social media. The SEC treated these statements as subject to Rule 10b-5 and the other anti-fraud standards imposed by the federal securities laws.

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George A. GellisSEC filed its first ICO-related Enforcement Action in the United States
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Amended Reporting Requirements for U.S. Taxpayers With Interest Over Foreign Financial Accounts

For all our clients who are subject to reporting of foreign bank accounts, there has been a recent change in deadlines associated with reporting requirements. The Financial Crimes Enforcement Network (FinCEN) has announced that the recently passed Surface Transportation and Veterans Health Care Choice Improvement Act changed the annual due date for filing Reports of Foreign Bank and Financial Accounts (FBAR) for foreign financial accounts to April 15.  It seems that this change was made in order to bring the FBAR due date in alignment with the April 15 Federal income tax filing season. Notably, the Act also mandates a maximum six-month extension of the filing deadline. This means that to implement the statute with minimal burden to the public, FinCEN will grant filers failing to meet the FBAR annual due date of April 15 an automatic extension to October 15 each year. No specific requests for this extension are required. Since the federal income tax filing date for tax year 2016, will be on April 18, 2017, the FBAR deadline will be on the same day.

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George A. GellisAmended Reporting Requirements for U.S. Taxpayers With Interest Over Foreign Financial Accounts
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Urgent Alert About New Federal Overtime Rules

As outsourced general counsel to most of our clients, we have to often deal with internal employment matters for our client companies.  Over the past years, overtime-pay related matters have been attracting more and more attention in a range of industries.  Yesterday, on May 18, 2016 the revised Overtime Rules were released by the federal Department of Labor.  The rules raise the minimum salary threshold for employees classified as “exempt” from the overtime pay requirements.  The new rules go into effect on December 1, 2016 and provide, among other requirements, that:

  1. In order to be considered exempt and ineligible for overtime wages under the “white collar” executive and administrative exemptions, most employees will need to be compensated on a salary basis of at least $913.00 per week (or $47,476.00 per year), in addition to the requirement that they perform certain delineated “exempt” duties and responsibilities. It is expected that this amount will be updated on January 1, 2020, and every three years thereafter.  Non-discretionary bonuses, incentives and commissions that are paid quarterly or more frequently can count towards up to ten percent of this salary amount.
  2. For employees to be classified as exempt under the “highly compensated exemption,” employees must actually receive a total annual compensation of at least $134,000.00 per year, and perform at least one exempt duty. If that amount is not actually received, for example because commission earnings were less than expected, an employer may bring the annual compensation to the required minimum within one month after the end of the year.

All employers irrespective of industries should be prepared to comply by December, potentially by raising salaries or by reclassifying employees as eligible for overtime pay (or non-exempt).

If you have any questions or concerns, please contact us.  Our experienced team of attorneys will help you navigate the regulations to ensure that your employees are being properly classified and that your companies are in full compliance with the new Federal requirements.

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George A. GellisUrgent Alert About New Federal Overtime Rules
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Happy Holidays!

Wishing our wonderful friends, clients and colleagues a very Merry Christmas and a happy, healty & prosperous New Year!

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RomanescoHappy Holidays!
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Unwitting Violations of Securities Act When Raising Initial Funds for Startups

As most of you know, our firm works with many startups, or emerging companies, within the framework of our “Startup Stars” program.  One of the issues that we have to deal with every single emerging company client is strategizing what is the best way to obtain initial financing.

Most startups get initial funds from their founders’ savings, money from friends and family, some debt and, at a later stage, approaching professional investors. Yet, what startup teams often do not realize is that by failing to consult qualified and experienced legal counsel and not following certain procedures they might have violated federal and state securities laws already at the initial stages of procuring investment.

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George A. GellisUnwitting Violations of Securities Act When Raising Initial Funds for Startups

Guidelines for Picking a Company Name

An emerging company’s name can be as important as its product. Names, logos, and branding can have an extraordinary effect on individuals and businesses, as consumers, and can shape the marketplace so directly that a nonsensical word like “uber” can come to identify a multi-billion dollar company. Since company and product names can be so powerful, it is important to be deliberate and intelligent in naming your startup.

The best protection for a company or product name is a trademark, but not all trademarks are alike. Names that are arbitrary or fanciful have the greatest trademark protection. Fanciful marks have no meaning and exist only for the purpose of branding.  Whereas, arbitrary marks have a common meaning, but do not describe the product or service itself. Examples of fanciful marks include Exxon and Kodak – words created for the purpose of branding. An example of an arbitrary mark is Apple – the common meaning of the word related to fruit has nothing to do with computers and electronics. Arbitrary and fanciful names have the highest levels of protection, and are therefore great assets for companies.

The next level of trademarks are suggestive marks. These marks may be desirable for companies because they can speak to the nature of the products, thereby notifying consumers of the nature of the goods or services being provided. For the same reason, the trademark protections are not as strong. Examples of suggestive marks are Greyhound for the bus line and Jaguar for the automotive company. These marks suggest the nature of the good or service, but require “imagination, thought and perception” from consumers. Suggestive marks can be difficult to trademark, however, because the line between suggestive and descriptive marks is sometimes hard to define.

The US Patent and Trademark Office is disinclined to issue trademarks for descriptive marks – unless they obtain secondary meaning. Just as the name suggest, descriptive marks speak directly to the good or service provided. These marks cannot be trademarked until a company can prove that the name has acquired a secondary meaning where consumers associate the name with a particular product, which usually requires five years and significant advertising budgets to prove. Startups without the luxuries of time and money are encouraged to avoid descriptive marks.

The last category of marks are generic marks. The US Patent and Trademark Office does not issue trademarks for generic marks and there are, therefore, no protections for these marks because they directly and generically describe the company’s product or services. The name “Emergency Dental Center” would never pass for an office that provides emergency dental services because it is completely descriptive of the services.

Startups should think very carefully before naming their company and products. A fanciful or arbitrary name can usually be easily trademarked and provides the company with the greatest extent of protection. A strong name with high levels of protection is likely to become one of the greatest assets for an emerging and developing enterprise.

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George A. GellisGuidelines for Picking a Company Name

Supreme Court decision likely to increase Trademark owners’ costs

The Supreme Court settled a divisive trademark issue in Hana Financial, Inc. v. Hana Bank, et al. The Justices decided that the legal concept of “trademark tacking” should be analyzed by a jury, in the event of a lawsuit, instead of a judge. The decision may not seem important to anyone unfamiliar with “trademark tacking,” but it will likely result in higher litigation costs for any trademark owner who has to protect their registered trademarks in court.

The concept of trademark tacking allows a trademark owner to alter a registered trademark and still keep the legal protection of the original mark. The only requirement is that the new mark must be the “legal equivalent” of the old mark. The test for this determination is that consumers must consider both marks to be indistinguishable. If the new mark meets the standard, it is afforded the legal benefits associated with the original mark. Trademark tacking exists because the Courts realize that trademark owners change their marks to modernize or adjust to market conditions.

The decision in Hana Financial makes sure that the question of what a typical consumer would consider “legal equivalents” is decided by a group of, presumably, typical consumers – the jury. The Supreme Court’s decision seems logical when considered that way. However, the ruling will have several implications for any trademark owner who has to defend a trademark in court. Any lawsuit that involves trademark tacking will now, likely, be more expensive. Matters of law can be decided by the judge at many stages of litigation and do not always require a full trail, which limits the costs and time associated with a lawsuit. Now that trademark tacking is determined by a jury, a full trial with discovery on the matter will be required. A potential unintentional benefit to this increased litigation cost is that fewer trademark tacking cases may be filed altogether. A second big concern for trademark owners is the increased uncertainty associated with jury determinations. A jury consists of a different group of people in every trial. Trying to guess how a hypothetical group of people will decide an issue is much more difficult than guessing how a judge who handles a lot of trademark lawsuits will rule.

The Supreme Court’s decision in this case will not have a direct impact on many people’s lives. However, all trademark owners should be mindful of this when making alterations to trademarks or contemplating litigation.

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George A. GellisSupreme Court decision likely to increase Trademark owners’ costs